Credit risk measurement: Developments over the last 20 years

By Edward I. Altman, Anthony Saunders. 1997

Abstract This paper traces developments in the credit risk measurement literature over the last 20 years. The paper is essentially divided into two parts. In the first part the evolution of the literature on the credit-risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the Journal of Banking and Finance and other publications. In the second part, a new approach built around a mortality risk framework to measuring the risk and returns on loans and bonds is presented. This model is shown to offer some promise in analyzing the risk-return structures of portfolios of credit-risk exposed debt instruments.

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Citations in the corpus

Ekiden: A Platform for Confidentiality-Preserving, Trustworthy, and Performant Smart Contracts (2018, background): “Credit scores are widely used by lenders, insurers, and others to evaluate the creditworthiness of consumers [8].”
An Analysis and Critique of the Bis Proposal on Capital Adequacy and Ratings (2001, unknown): “6 A survey of these methods can be found in Altman and Saunders (1997).”
Generally accepted rating principles: A primer (2001, unknown): “A well known example is the z-score proposed by Edward Altman in 1977 (see Altman and Saunders (1996) for a survey and further references).”
Procyclicality of the financial system and financial stability: issues and policy options (2001, background): “98 Altman and Saunders (2001) argue that linking capital requirements to external ratings could increase financial instability due to the tendency for ratings downgrades to occur more frequently in recessions than in booms.”
Multi–objective Evolutionary Algorithms for the Risk–return Trade–off in Bank Loan Management (2002, background): “…6 (B) 7 (CCC) i 0.06 0.17 1.56 3.37 8.63 12.84 22.67 Risk A number of measures are today used for measuring risk in a particul r credit portfolio (Altman and Saunders 1997; Leland 1998; Shearer 1997)Risk is assumed to be correlated to the standard deviation of returns on the portfolio: 2p = (Xi2…”
A NON-RECURSIVE REGRESSION MODEL FOR COUNTRY RISK RATING (2003, background): “The explanation given by Altman and Saunders is that agencies gradually downgrade the rating of a country, since they do not want to hurt the country, which is also their client. Kunczik (2001) note that the IMF (1999) fears the danger that “issuers and intermediaries could be encouraged to engage i”
The Effect of Conforming Loan Status on Mortgage Yield Spreads: A Loan Level Analysis (2004, background): “Studies of the determinants of yield spreads in the corporate bond literature have focused on credit spreads (see Altman and Saunders 1998 for a review). For mortgages, credit risk has traditionally been viewed as a function of borrower equity or loan-to-value ratio. Early research includes von Furs”
Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature (2001, unknown): “56 See Altman and Saunders (1998) for a discussion on the progress in credit risk measurement and Gordy (2000) and Crouhy, Galai and Mark (2000) for a comparison of some credit risk models.”