How powerful credit-scoring models can be in context of the financial globalization?
21/2007 , p89..104
Author(s):
Petre BREZEANU
Cristina Maria TRIANDAFIL
Keywords:
Credit-scoring models, sovereign/industry rating, Estimated Default Frequency (EDF)
Abstract:
Since Altman and Conan, standardized credit scoring models have been an important tool in order to quantify and control the credit risk. In context of the financial globalization, capitals have been directed especially towards the emerging countries owing to the advantages in terms of higher yield which also implies higher risks. This is why newly adapted credit scoring models were built by rating agencies, different from the standard ones, as now the corporate credit rating also incorporates the dimension of the sovereign and industry rating too. The paper aims at analyzing the evolution of the credit-scoring models, from the standardized to the adapted ones, underlying the efficiency of the contemporary credit-scoring models implemented by Moody’s in reflecting the corporate default probability in the Eastern Europe countries. The database which will be valorized as case study belongs to the Credit Division of Hewlett Packard which focuses the credit rating activity on the Moody’s methodology.
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