FIN-02-041 |
NYU Stern School of Business |
Revisiting Credit Scoring Models in a Basel 2 Environment
May 2002
Edward I. Altman
ABSTRACT
This paper discusses two of the primary motivating influences on the recent
development/revisions of credit scoring models, i.e., the important implications of
Basel 2’s proposed capital requirements on credit assets and the enormous amounts
and rates of defaults and bankruptcies in the US in 2001-2002. Two of the more
prominent credit scoring techniques, Z-Score and KMV’s EDF models, are
reviewed. Finally, both models are assessed with respect to default probabilities in
general and in particular to the infamous Enron debacle. In order to be effective,
these and other credit risk models should be utilized by firms with a sincere credit
risk culture.
Edward I. Altman
Institution: Stern School of Business, New York University, 44 West 4th Street, New York, NY 10012
Telephone: (212) 998-0709
Email: ealtman@stern.nyu.edu
Homepage:http://www.stern.nyu.edu/~ealtman
To download a copy of this paper click here
To request a copy of this paper click here
|