RMBI 4210 Quantitative Methods for Risk Management Tutorial 9 CreditMetrics
CreditMetrics
http://homepages.rpi.edu/~guptaa/MGMT4370.09/Data/CreditMetricsIntro.pdf
Key: credit migration analysis, model the full forward distribution of the values related to credit migration only.
Steps: 1) Specify a rating system; 2) Specify the forward discount curve at the risk horizon(s) for each credit category, and the recovery rate. ¡ú Specification of the transition matrix (based on historical data, such that you may translate the first two parts of information into the forward distribution of the changes in portfolio value with respect to credit migration)
HW 27 – 28
Spring, 2021
Wang Jingjing Page 1