Category: Credit Risk & Default Analysis

Let’s talk about counterparty default risk—it’s the risk that the other party in your derivative trade won’t meet their obligations, causing potential financial losses. The global financial crisis really hammered home the importance of managing this risk. It showed everyone how one default can create a domino effect, leading to huge losses across the financial […]

When it comes to corporate credit risk modeling, start with the essentials: data collection, analysis, model development, validation, and implementation. High-quality data is the backbone for accurate models. Advanced statistical techniques like logistic regression, decision trees, and machine learning can enhance the capacity of these models

When comparing default risk and settlement timing risk, the main difference lies in the severity of the outcome. Default risk means a party fails to meet their financial obligation entirely, potentially leading to complete loss. In contrast, settlement timing risk involves delays in transaction completion, but the payment or exchange eventually happens.