ABSTRACT
INTRODUCTION Lending is one of the oldest nancial activities: you give me some money; I agree to pay you back with interest. You are exposed to my performance under this contract, and su er a loss if I do not repay you. Credit risk, then, is the risk of loss from the failure of a counterparty to ful l its contractual obligations. is failure is o en due to default: the counterparty fails, and the lender may have to queue up with other creditors in order of seniority and present their claim to the liquidator.
