Credit Risk Modeling using Excel and VBA

It is common to blame the inadequacy of credit risk models for the fact that the financial crisis has caught many market participants by surprise. On closer inspection, though, it often appears that market participants failed to understand or to use the models correctly. The recent events therefore do not invalidate traditional credit risk modeling as described in the first edition of the book. A second edition is timely, however, because the first dealt relatively briefly with instruments featuring prominently in the crisis (CDSs and CDOs). In addition to expanding the coverage of these instruments, the book will focus on modeling aspects which were of particular relevance in the financial crisis (e.g. estimation error) and demonstrate the usefulness of credit risk modelling through case studies. This book provides practitioners and students with an intuitive, hands-on introduction to modern credit risk modelling. Every chapter starts with an explanation of the methodology and then the authors take the reader step by step through the implementation of the methods in Excel and VBA.  They focus specifically on risk management issues and cover default probability estimation (scoring, structural models, and transition matrices), correlation and portfolio analysis, validation, as well as credit default swaps and structured finance.

Author Biography

Gunter Loffler is Professor of Finance at theUniversity of Ulm in Germany. His current research interests are oncredit risk and empirical finance. Previously, Gunter was AssistantProfessor at Goethe University Frankfurt, and served as an internalconsultant in the asset management division of Commerzbnk, HisPh.D. in finance is from the University of Mannheim. Gunter hasstudied at Heidelberg and Cambridge Universities. Peter N. Posch is Assistant Professor of Finance at theUniversity of Ulm in Germany. Previously Peter was co-head ofcredit treasury at a large bank, where he also traded creditderivatives and other fixed income products for the bank sproprietary books. His Ph.D. in finance on the dynamics of creditrisk is from the University of Ulm. Peter has studied economics,philosophy and law at the University of Bonn.