Credit Risk Modeling

PD, LGD, EAD modeling and credit portfolio risk management

Credit Risk Modeling

Executive Summary

Credit risk modeling quantifies default probability (PD), loss given default (LGD), and exposure at default (EAD) for capital, pricing, and portfolio management. Banks and insurers use these models for regulatory capital (Basel, IFRS 9) and internal ratings; treasurers and risk teams use them for limits and pricing. For consultants advising on credit models, validation, or regulatory implementation, the ability to explain PD/LGD/EAD and portfolio risk in clear terms supports credible delivery and value for money—and the depth that strengthens book and training offerings. This manual covers the framework and techniques used in practice.

Learning Objectives

By the end of this manual, you will understand:

  • Credit risk components and modeling framework
  • Probability of Default (PD) estimation methods
  • Loss Given Default (LGD) and Exposure at Default (EAD) modeling

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