Basel III Credit Rating Systems

LUISA IZZI, PhD in Economics and Financial Decisions, is Head of Model Validation, BNL-BNP Paribas Group, Italy. She has worked in different areas of risk management in international banking groups, supporting the group-wide Basel implementation and validation processes. She is author of a number of scientific publications and articles in mathematical finance and economics.GIANLUCA ORICCHIO is Professor of Finance and Capital Markets, CBM University, Italy.He has held senior capital and risk management positions at several global financial institutions. He has been Head of ACPM in Capitalia Banking Group and Head of Group Credit Treasury at Unicredit Group. Mr. Oricchio has written several books on financial markets, corporate finance and risk management. LAURAVITALEis Head of Judgemental Rating, BNL-BNP Paribas Group, Italy. She has worked for major Italian banks in the areas of investment banking, and M&A. She has also been Head of Business Development in the Public Administration Sector, BNL-BNP Paribas Group, Italy, and has written many articles appearing in academic journals.

• Foreword Introduction: The Efficient Market Hypothesis (EMH) and Basel III New Banking Regulation PART I: THE QUANTITATIVE APPROACH TO CREDIT RATING MODELS SME Corporate and Retail PD Models Sovereign and Banks Rating Models Exposure at Default Valuation Loss Given Default Estimation Validation of Credit Internal Models PART II: THE QUALITATIVE APPROACH TO CREDIT RATING MODELS The Internal Rating Agency Organization and Scope Expert Judgment Based Rating Assignment Process Slotting Criteria Credit Rating Models Global Recovery Rate (GRR) PART III: RATING ASSIGNMENT ON SPECIALIZED LENDING Rating Assignment on Object Finance Rating Assignment on Telecom Operators PART IV: RISK ADJUSTED CREDIT PRICING MODELS Pricing in Liquid Markets CDS-Implied EDF Credit Measures and Fair-Value Spreads Pricing in Non-Liquid Markets