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paper was originally prepared for the following publication, Ong, M., “Credit Rating: Methodologies, Rationale and Default Risk, ” London, Risk Books, 2002. PREDICTING CORPORATE DISTRESS IN A TURBULENT ECONOMIC AND REGULATORY ENVIRONMENT

By  and Edward I. Altman and Edward I. Altman

Abstract

This paper discusses two of the primary motivating influences on the recent development/revisions of credit scoring models, i.e., the important implications of Basel 2’s proposed capital requirements on credit assets and the enormous amounts and rates of defaults and bankruptcies in the US in 2001-2002. Two of the more prominent credit scoring techniques, Z-Score and KMV’s EDF models, are reviewed. Finally, both models are assessed with respect to default probabilities in general and in particular to the infamous Enron and WorldCom debacles. In order to be effective, these and other credit risk models should be utilized by firms with a sincere credit risk culture

Topics: Key Words, Credit Risk Models, Default Probabilities, Basel 2, Z-Score, KMV
Year: 2002
OAI identifier: oai:CiteSeerX.psu:10.1.1.198.8617
Provided by: CiteSeerX
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