Contents
1. Introduction to CREDITRISK+ 3
1.1 Developments in Credit Risk Management 3
1.2 Components of CREDITRISK+ 3
1.3 The CREDITRISK+ Model 4
1.4 Economic Capital 4
1.5 Applications of CREDITRISK+ 5
1.6 Example Spreadsheet Implementation 5
2. Modelling Credit Risk 6
2.1 Risk Modelling Concepts 6
2.2 Types of Credit Risk 7
2.3 Default Rate Behaviour 8
2.4 Modelling Approach 9
2.5 Time Horizon for Credit Risk Modelling 10
2.6 Data Inputs to Credit Risk Modelling 11
2.7 Correlation and Incorporating the Effects of Background Factors 14
2.8 Measuring Concentration 16
3. The CREDITRISK+Model 17
3.1 Stages in the Modelling Process 17
3.2 Frequency of Default Events 17
3.3 Moving from Default Events to Default Losses 18
3.4 Concentration Risk and Sector Analysis 20
3.5 Multi-Year Losses for a Hold-to-Maturity Time Horizon 21
3.6 Summary of the CREDITRISK+ Model 22
4. Economic Capital for Credit Risk 23
4.1 Introduction to Economic Capital 23
4.2 Economic Capital for Credit Risk 23
4.3 Scenario Analysis 24
5. Applications of CREDITRISK+ 26
5.1 Introduction 26
5.2 Provisioning for Credit Risk 26
5.3 Risk-Based Credit Limits 29
5.4 Portfolio Management 29

Appendices
A. The CREDITRISK+Model 32
A1 Overview of this Appendix 32
A2 Default Events with Fixed Default Rates 33
A3 Default Losses with Fixed Default Rates 35
A4 Loss Distribution with Fixed Default Rates 38
A5 Application to Multi-Year Losses 39
A6 Default Rate Uncertainty 41
A7 Sector Analysis 41
A8 Default Events with Variable Default Rates 44
A9 Default Losses with Variable Default Rates 46
A10 Loss Distribution with Variable Default Rates 47
A11 Convergence of Variable Default Rate Case to Fixed Default Rate Case 49
A12 General Sector Analysis 50
A13 Risk Contributions and Pairwise Correlation 52
B. Illustrative Example 58
B1 Example Spreadsheet-Based Implementation 58
B2 Example Portfolio and Static Data 58
B3 Example Use of the Spreadsheet Implementation 60
C. Contacts 66
D. Selected Bibliography 68
List of Tables
Table 1: Representations of the default rate process 9
Table 2: One-year default rates (%) 12
Table 3: Default rate standard deviations (%) 13
Table 4: Recovery rates by seniority and security (%) 14
Table 5: Mechanisms for controlling the risk of credit default losses 25
Table 6: Provisioning for different business lines 28
Table 7: Example of credit risk provisioning 28
Table 8: Example portfolio 59
Table 9: Example mapping table of default rate information 59
Table 10: Example 1A - Risk contributions 64
Table 11: Example 1B - Risk analysis of removed obligors 65
Table 12: Example 1B - Portfolio movement analysis 65