Credit Risk: Credit where credit is due...

JP Morgan won plaudits for altruism when it donated RiskMetrics, a market volatility matrix, to the financial world in 1994. RiskMetrics also proved a superb way of marketing the Morgan name. Now JPM is at it again with a release of CreditMetrics for global consumption.

As always Morgan has one eye on the regulators, and a hope that models to value credit risk will become as acceptable to them as market-risk models.

JP Morgan designed CreditMetrics to provide lenders with better information and a better system for navigating their way around their credit-risk exposure - and to promote a view of credit risk as the fluctuating uncertainty in the value of a portfolio of loan assets or of a single loan that can be attributed to changes in the credit quality.

CreditMetrics attempts to enumerate all possible outcomes for improvement or deterioration in the creditworthiness of each borrower, assigning a probability...