Abstract :
One of the important risks that commercial banks encounter is credit risk, and it is impossible for these banks to operate banking activities without undertaking and managing the credit risk. There are four different credit risk definitions of those are basic credit risk, credit risk resulting from market risk, residual risk and credit concentration risk. The basic parameters of credit risk measurement models are default rate (expected loss, unexpected loss), recovery rate, rating transitions, risk adjusted return on capital and risk based capital. It is necessary for banks to manage credit risk in order to measure it. The credit risk management methods use quantitative and qualitative measurements. These methods include a wide range of models from statistical and econometrics extending to international credit risk management software. Although they include different kinds of methods, almost all the credit risk management models are established to measure the default probability of credit or the probability of changing quality of credit.
