In the upcoming workshop (Part 1.), we will briefly survey the main approaches to credit risk modelling and discuss their advantages and disadvantages, subsequently taking a more detailed look at the first of these, the firm value models. These models are based on the original idea of Merton that the limited liability of shareholders makes it possible to view equity as a call option on the firm's assets, with a strike price equal to the level of debt outstanding. Numerous extensions making these models more applicable in practice have since been proposed and this approach forms the basis of several commercial implementations, the most widely known of which is KMV.

Presentations

• Volf Frishling: Credit Derivative Pricing Models (Word document)
• Eric Schlogl: Overview of Credit Derivaitves and Credit Risk Modelling (PDF file)

Please feel free to bring this to the attention of interested colleagues.