3rd paper

3rd paper

Risk and cost accounting proecdures

Much risk premium must be added for the uncertainty of using such a model. The logic for the model might be outdated or just plain wrong. Particular concern must be given if the investment is unique and the model was written for that particular investment. Mortgage-backed securities were commonly priced this way, leading to the financial debacle of 2007 and the following recession.

The Basel Committee has developed separate papers on a number of related topics in the area of credit risk including credit risk modelling and credit risk management. Banking supervisors promote sound credit ...