Credit risk measurement: Developments over the last 20 years

This paper traces developments in the credit risk measurement literature over the last 20 years. The paper is essentially divided into two parts. In the ®rst part the evolution of the literature on the credit-risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the Journal of Banking and Finance and other publications. In the second part, a new approach built around a mortality risk framework to measuring the risk and returns on loans and bonds is presented. This model is shown to o€er some promise in analyzing the risk-return structures of portfolios of credit-risk exposed debt instruments. Ó 1998 Elsevier Science B.V. All rights reserved. JEL classi®cation: G21; G28