CREDIT RISK MEASUREMENT - DEVELOPMENTS OVER THE LAST 20 YEARS

This paper traces developments in the credit risk measurement literatu re over the last 20 years. The paper is essentially divided into two p arts. In the first part the evolution of the literature on the credit- risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the J ournal of Banking and Finance and other publications. In the second pa rt, a new approach built around a mortality risk framework to measurin g the risk and returns on loans and bonds is presented. This model is shown to offer some promise in analyzing the risk-return structures of portfolios of credit-risk exposed debt instruments. (C) 1998 Elsevier Science B.V. All rights reserved.