CREDIT RISK MODELLING: CURRENT PRACTICES AND …

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CREDIT RISK MODELLING: CURRENT PRACTICESANDAPPLICATIONSBasle Committee on Banking SupervisionBasleApril 1999TABLE OF CONTENTSList of ParticipantsExecutive SummaryPart I:Introduction1. Overview ........................................ ........................................ ............... 82. Internal Applications of CREDIT Risk Models ........................................ 93. Key Challenges to Regulatory 104. Organisation of Report ........................................ ................................... 11Part II:Overview of Conceptual Approaches to CREDIT Risk Modelling1. Economic Capital Allocation ........................................ ......................... 13A. Probability Density Function of CREDIT Losses ............................. 13B. Key Issues ........................................ ........................................ ...... 162. Measuring CREDIT Loss.

• Different approaches to the aggregation of credit risk. Credit risk may be measured at the individual asset level, as is typically the case with large corporate and capital market instruments; conversely, aggregate (pooled) data may be used to quantify the risk of smaller loans with similar risk profiles.

  Different