Credit Curve

From Open Risk Manual

Definition

Credit Curve denotes a grouping of credit risk metrics (parameters) that provide estimates that a legal entity experiences a Credit Event over different (an increasing sequence of longer) time periods

Notation

The credit curve (default curve) at timepoint t_0 is the collection of credit default expectation probabilities at the various future timepoints.

Characteristics

  • A credit curve is a type of Term Structure.
  • It may refer purely to the likelihood of a default or incorporate also a loss estimate
  • It may be empirical (historical) in nature or derived from models and/or market data

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