Developing, Validating and Using Internal Ratings (eBook)

GIACOMO DE LAURENTIS, Department of Finance and SDA Bocconi School of Management, Bocconi University, Italy. RENATO MAINO, Lecturer, Bocconi University and Turin University, Italy. LUCA MOLTENI, Department of Economics and SDA Bocconi School of Management, Bocconi University, Italy.

Preface

1 Introduction

2 Classifications and key concepts of credit risk

2.1 A classification

2.2 Key concepts

3 Rating assignment methodologies

3.1 Experts based approaches

3.2 Statistical based models

3.3 Heuristic and numerical approaches

3.4 Involving qualitative information

4 Developing a statistical based rating system

4.1 The process

4.2 Setting model's objectives and generating thedataset

4.3 Case study: dataset and preliminary analysis

4.4 Defining an analysis sample

4.5 Univariate and bivariate analyses

4.6 Estimating a model and assessing its discriminatorypower

4.7 From scores to ratings and from ratings to probabilities ofdefault

5 Validating rating models

5.1 Validation profiles

5.2 Roles of internal validation units

5.3 Qualitative and quantitative validation

6 Case Study. Validating PanalpBank's statistical basedrating system for Financial Institutions 211

6.1 Case study objectives and context

6.2 The 'Development report' for the validationunit

6.3 The 'Validation report' by the validationunit

7 Conclusions. Ratings usage opportunities andwarnings.

7.1 Internal ratings are critical to credit risk management

7.2 Internal ratings assignment trends

7.3 Statistical based ratings and regulation: conflictingobjectives?

7.4 Statistical based ratings and customers: needs and fears

7.5 Limits of statistical based ratings

7.6 Statistical based ratings and the theory of financialintermediation

7.7 Statistical based ratings usage: guidelines

Bibliography

Subject Index