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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...

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