A critique of credit risk models with evidence from mid-cap firms
John Wiley and Sons Ltd
Place of Publication
Zopounidis, C. & Galariotis, E.
Faculty of Business and Law
School of Business
High bank failures and the significant credit problems faced by banks during the global financial crisis (GFC) are a stark reminder of the importance of accurately measuring and providing for a credit risk. There are a variety of available credit modeling techniques, leaving banks faced with the dilemma of deciding which model to choose. This article examines three widely used categories of models across a 10-year period spanning the global financial crisis (GFC) as well as pre-GFC and post-GFC in order to determine their relative advantages and disadvantages over different economic conditions. The comparison includes ratings-based models, accounting models, and structural models.