Models of credit risk measurement include:

Question

Quizplus · Accepted Answer

All of the listed options are correct models of credit risk measurement. The term structure of credit risk approach focuses on the relationship between a company's default risk and the term structure of interest rates. The mortality rate approach uses data on the historical default rates of similar borrowers to estimate the default risk of a particular borrower. RAROC (Risk-Adjusted Return on Capital) and option models incorporate the cost of the credit risk into profitability analysis and take into account the possibility of default and the value of collateral. Therefore, all of these models are valid approaches to measuring credit risk.

Models of Credit Risk Measurement Include