Model Insight - Sweden Credit Model Enhancements in BIM301 - June 2012
Jun 9, 2012
The new BIM301 Sweden Credit model for non-government bonds offers a more granular view of risk for these assets. The model is similar in structure to the Barra credit factor models for other developed markets, including the US, UK, and EMU. We have added six sector-by-rating spread factors, each aligned with a particular segment of the Sweden credit market. In addition, we have developed a rating transition specific risk model for Sweden, similar in structure to the specific risk models used in other developed markets. This new set of spread factors and the new rating transition specific risk model improve both in-sample and out-of-sample performance statistics compared to the previous model.