Credit Scoring, Country Risk, Default Probabilities, and Credit VaR
Free GARP FRM Part II lesson in Credit Risk Measurement and Management. 25 min read, ~3,703 words.
Credit scoring ranks borrowers by default probability using empirical models (logistic regression, decision trees). FICO buckets: super-prime 800+, prime 740 to 799, near-prime 670 to 739, subprime below 670. Application vs behavioral scoring: application uses static data at origination; behavioral uses ongoing payment patterns to adjust limits, repricing, and collection...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
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