From CreditMetrics to CreditRisk+ and Back Again
by Michael B. Gordy of the Federal Reserve Board
June 23, 1998
Abstract: In the short time since their public releases in 1997, J.P. Morgan's CreditMetrics and Credit Suisse's CreditRisk+ have become influential benchmarks for internal credit risk models. Practitioners and policy makers have invested in implementing and exploring each of the models individually, but have made less progress with comparative analyses. Direct comparison of the models is not straight- forward, because the two models are presented within rather different mathematical frameworks. One is familiar to econometricians as an ordered probit model, the other is based on insurance industry models of event risk. CreditMetrics and CreditRisk+ may be addressing the same topic, but they appear to speak in different languages.