Recovery Rate And Default Correlation Of Credit Risk Model

Research on credit risk is more and more important today. Western countries such as USA, have done much work on credit risk. However , it is just a beginning in china.Three main models on the current international credit risk are CreditMetrics, KMV and Creditrisk+. They are different in modeling. Furthermore, it is an important step to estimate different parameters such as LGD and default correlation.Because of lack of data, it is not easy to estimate these parameters, especially such as default correlation. CreditMetrics applies the correlation of asset returns to infer default correlation. But it uses fixed correlation of asset return. Dynamic models are developed in this paper.