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Credit Risk ManagementBasic Concepts: Financial Risk Components, Rating Analysis, Models, Economic and Regulatory Capital$
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Tony Van Gestel and Bart Baesens

Print publication date: 2008

Print ISBN-13: 9780199545117

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199545117.001.0001

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Risk modelling and measurement

Risk modelling and measurement

(p.168) 4. Risk modelling and measurement
Credit Risk Management

Tony Van Gestel

Bart Baesens

Oxford University Press

This chapter highlights the conceptual aspects of a rating system without focusing on mathematical and technical aspects. An overview is provided of the different aspects of risk measurement and modelling: data, modelling techniques, and implementation for use. All aspects of the development and implementation of a new model are discussed. The system life cycle is explained in section 4.2. Section 4.3 provides a high-level overview on credit scoring models. Such models rely on data, for risk measurement, model use, and model development. The data issues are discussed in Section 4.4. Section 4.5 provides a bird's eye view on the model development process of internal rating systems. Implementation aspects are discussed in Section 4.6. Section 4.7 explains that models need to be maintained and updated regularly. Section 4.8 explains the different, but also partially overlapping aspects of model validation, quality control, and backtesting.

Keywords:   rating systems, system life cycle, credit scoring, risk quantification, risk measurement

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