An Analytic Approach to Rating Transitions
by Carsten Binnenhei of Landesbank Baden-Wuerttemberg
June 3, 2003
Abstract: Extending CSFP's CreditRisk+ model to multiple states allows one to incorporate credit quality changes into the calculation of portfolio credit risk. Several modifications to the original CreditRisk+ methodology are proposed to make this model extension tractable. The distribution of portfolio value changes is obtained analytically by a two-dimensional recurrence algorithm.
This paper is republished as Ch.12 in...