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Full-Text Articles in Finance and Financial Management
Innovative Transition Matrix Techniques For Measuring Extreme Risk: An Australian And U.S. Comparison, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Innovative Transition Matrix Techniques For Measuring Extreme Risk: An Australian And U.S. Comparison, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Research outputs 2011
Comparing Australia and the U.S. both prior to and during the Global Financial Crisis (GFC), using a dataset which includes more than six hundred companies, this paper modifies traditional transition matrix credit risk modelling to address two important issues. Firstly, extreme credit risk can have a devastating impact on financial institutions, economies and markets as highlighted by the GFC. It is therefore essential that extreme credit risk is accurately measured and understood. Transition matrix methodology, which measur es the probability of a borrower transitioning from one credit rating to another, is traditionally used to m easure Value at Risk (VaR), …
Credit Risk Measurement Methodologies, David Allen, Robert Powell
Credit Risk Measurement Methodologies, David Allen, Robert Powell
Research outputs 2011
The significant problems experienced by banks during the Global Financial Crisis have highlighted the critical importance of measuring and providing for credit risk. This paper will examine four popular methods used in the measurement of credit risk and provide an analysis of the relative shortcomings and advantages of each method. The study includes external ratings approaches, financial statement analysis models, the Merton / KMV structural model, and the transition based models of CreditMetrics and CreditPortfolioView. Each model assesses different cr iteria, and an understanding of the merits and disadvantages of the various models can assist banks and other credit modellers …