CreditRisk+, the actuarial model for calculating portfolio credit risk, is based upon:

CreditRisk+, the actuarial model for calculating portfolio credit risk, is based upon:
A . the exponential distribution
B . the normal distribution
C . the Poisson distribution
D . the log-normal distribution

View Answer

Answer: C

Explanation:

CreditRisk+ treats default as a binary event, ignoring downgrade risk, capital structures of individual firms in the portfolio or the causes of default. It uses a single parameter, or the mean default rate, and derives credit risk based upon the Poisson distribution. Therefore Choice ‘c’ is the correct answer.