Credit risk models such as PD, LGD and EAD models are used in various areas of risk management in banks and financial institutions such as in
1- Loan acceptance
2- Provisioning
3- Capital Calculation
4- Pricing
Credit risk models should be monitored to assess if the models built in past are fit for use for the current year and the future years. Usually the models are monitored to know if they can be used for next 12 months .
If the models are not performed as per the expectation then they have to be redeveloped. It is also regulatory requirement these days to regularly (at least once a year) assess the model performance.
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Credit risk are also these days used by FinTech companies. Increased regulations are making it compulsory for the fintech companies to use these days in their day to day operation.
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