Measuring and managing market, credit and Op risk [49]

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Bullet points include: Ratings transition matrix for simulating ratings histories forwards Spread and interest rates for valuing claims at horizon Assumptions on random recoveries for use in valuing positions that have defaulted at horizon (some data also available from ratings agencies) Correlation matrix used in generating correlated ratings changes N.B. Implicit is assumption that rating ascribed to instrument (and historic data relevant to that rating) encodes information about its future creditworthiness / credit trajectory that is not otherwise available from other sources e.g. past history

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