The estimation and validation of the Basel II risk parameters PD (default probability), LGD (loss given default), and EAD (exposure at default) is an important problem in banking practice. These parameters are used on the one hand as inputs to credit portfolio models, on the other to compute regulatory capital according to the new Basel rules. The book covers the state-of-the-art in designing and validating rating systems and default probability estimations. Furthermore, it presents techniques to estimate LGD and EAD. A chapter on stress testing of the Basel II risk parameters concludes the monograph.

Statistical Methods to Develop Rating Models

Estimation of a Rating Model for Corporate Exposures
The Shadow Rating Approach - Experience from Banking Practice
Estimating Probabilities of Default for Low Default Portfolios
Transition Matrices: Properties and Estimation Methods
A Multi-Factor Approach for Systematic Default and Recovery Risk
Modelling Loss Given Default: A "Point in Time"-Approach
Estimating Loss Given Default - Experiences from Banking Practice
Possibilities of Estimating Exposures
EAD Estimates for Facilities with Explicit Limits
Validation of Banks' Internal Rating Systems - A Supervisory Perspective
Measures of a Rating' s Discriminative Power - Applications and Limitations
Statistical Approaches to PD Validation
PD-Validation - Experience from Banking Practice
Development of Stress Tests for Credit Portfolios
Risk Management of Loans and Guarantees
Risk Management of Loans with Embedded Options.