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10 - Issues in the Validation of Wholesale Credit Risk Models

Published online by Cambridge University Press:  02 March 2023

By
Jonathan Jones  and
Debashish Sarkar
Edited by
David Lynch ,
Iftekhar Hasan  and
Akhtar Siddique
David Lynch
Affiliation:
Federal Reserve Board of Governors
Iftekhar Hasan
Affiliation:
Fordham University Graduate Schools of Business
Akhtar Siddique
Affiliation:
Office of the Comptroller of the Currency
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Summary

This chapter examines wholesale credit risk models and their validation at US banking institutions. The most common practice in wholesale credit risk modeling for loss estimation among large US banking institutions today is to use expected loss models, typically at the loan level. The chapter discusses the quantification and validation of three key risk parameters in this modeling approach, namely, probability of default (PD), loss given default (LGD), and exposure at default (EAD).

Keywords

Wholesale credit riskcommercial
Type
Chapter
Information
Validation of Risk Management Models for Financial Institutions
Theory and Practice
 , pp. 232 - 262
Publisher: Cambridge University Press
Print publication year: 2023

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