Questions tagged [credit-risk]

The risk that a borrower will default on any type of debt by failing to make required payments and that the corresponding lender suffers a loss.

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8
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1answer
5k views

Documentation of the ISDA CDS standard model

I have to validate the use of the ISDA CDS standard model. Don't understand me wrong - I am sure that the ISDA model is "good" I just need to know what it is in detail. I can download an Excel-...
3
votes
1answer
126 views

Simplifying an expectation function of default time and rates

I have the following expectation to calculate : $$ \mathbf{E}\left[ e^{\int_{t_0}^{\tau} r_s ds} \mathbf{1}_{\{\tau < T\}}\right] $$ More precisely, I want to show that : $$ \mathbf{E}\left[ e^{\...
3
votes
3answers
6k views

How do right-to-break clauses affect CVA calculations

Does the presence of a optional/mandatory right-to-break clause affect CVA calculations, and if so, how? Given two (otherwise identical) 10y swaps with the same counterparty, one of which has a right ...
3
votes
3answers
336 views

Merton model riskless self-financing derivation

Suppose $dA_t = A_t[\mu dt+\sigma dW_t]$ (assets' value) under the physical measure, plus the other assumptions of the Merton model. Suppose further that debt and equity are tradeable assets that ...
3
votes
1answer
4k views

What is Margin of Conservatism

In modelling loss given default,(LGD), we often encounter the term Margin of Conservatism. What is it in layman's terms? I am not able to find a wikipedia page on this.
2
votes
1answer
94 views

Probability of Default calculation

I am looking for some good resources with handful of workout examples, on the modelling of the Probability of Default under IFRS9...
1
vote
1answer
1k views

How to compute the volatility for the Merton's Model for Private firm?

After one day of research i did not figured how to compute the input volatility for PRIVATE COMPANY in order to calculate the PD. My goal is to compute the PD of each of my company in my portfolio, ...
0
votes
1answer
106 views

Credit Migration Risk

I have a problem in which I have been given data for two periods over a set of customers. Each set consists of the fields: ID, rating, PD, LGD, Exposure (on- and off-balance sheet exposures), EAD, RWA,...