Credit risk management models
One of the main goals of financial institutions is to minimize risk because it is directly related to their profitability and performance. In the business of lending and trading, there is always a risk for counterparties and associates to default on their debts. This thesis is an exposition of some...
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| Format: | text |
| Language: | English |
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Animo Repository
2013
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| Online Access: | https://animorepository.dlsu.edu.ph/etd_bachelors/2895 |
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| Institution: | De La Salle University |
| Language: | English |
| Summary: | One of the main goals of financial institutions is to minimize risk because it is directly related to their profitability and performance. In the business of lending and trading, there is always a risk for counterparties and associates to default on their debts. This thesis is an exposition of some mathematical models used for managing credit risk. These include the Black-Scholes model (1973) and the Merton model (1974) which use the capital structure of firms (i.e. assets and liabilities) as default indicators. Threshold models will also be discussed in this thesis. In contrast to the first two models mentioned, the threshold models are not limited to a firm's assets and liabilities, but include more state variables and economic factors as indicators for default. |
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