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CREDIT RISK - Coggle Diagram

- - - - 3.1 Structural Models
        
        Concept: Based on firm's asset value and capital structure
        
        Models:
        
        Merton Model (equity as call option, default if assets < debt)
        
        First Passage Models (default can occur anytime asset value hits barrier)
        
        KMV Model (distance to default and expected default frequency)
        
        Vasicek Model (dynamic default barriers and term structure)
    - - Concept: Default modeled as stochastic event, hazard rates
      - Models:
        
        Jarrow-Turnbull Model (Poisson process for default timing)
        
        Duffie-Singleton Model (continuous-time default intensity)
        
        CreditRisk+ Model (actuarial approach with probability generating functions)
    - - 3.3 Transition Matrix Models
        
        CreditMetrics Model (by J.P. Morgan)
        
        Uses credit rating transition probabilities
        
        Gaussian copulas for correlation between obligors
        
        Credit value-at-risk (VaR) calculation