Non Performing Loan

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Credit Risk Management - Literature Review
In 2002, Italian researchers Alexandere Kurth, Hadley Taylor and Armin Wagner presented “An Extended analytical approach to Credit risk Management”. Some of the key factors in credit risk modeling are very influential in the implementation of the models. ‘Reduced form models' for the measurement of credit risk provide closed-form solution for calculating portfolio loss distribution. The limitations of this model do exist but often misinterpreted. An analytical approach allows us to dismantle the mathematical components of the models for its modification and extension in numerous ways. The orthogonally of background factors is the main hindrance to real-world macroeconomics indexes or industrial sectors and geographical areas which is one of the most repellent features of this model. The amendments in the original model, includes consideration of correlation among default risk sectors and severity of risk segments. The application of this is based on real-life data such as mortality rate data as give by Italian Central Bank.
In 2002 a comprehensive study was conducted by Edward I. Altman named as “Managing Credit Risk: A Challenge for the New Millennium” .The research emphasized the importance of credit-risk management in the present era. The high default rates and bankruptcies are now more important factors in credit risk management. The interest rate was very high in that scenario. In 1999 banks, regulators and financial market practitioners were considering the credit risk management inevitable because of various reasons: The sophisticated risk management techniques in a regulatory environment were needed to be emphasized. The refinements in credit-scoring techniques were required. The establishment of databases on defaults, recoveries and credit migrations were immensely desired. Credit risk mitigation techniques such as securitizations, credit derivatives and credit insurance products were to be developed. Portfolio

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