Market risk pricing model

The market risk pricing model is analogous to the credit risk pricing model, except
that it is limited to assets without credit risk. This component models the change in
the market rates such as credit-riskless, US Treasury interest rates. To price all the
credit risky assets completely and accurately it is necessary to have both a market
risk pricing model and credit risk pricing model.
Most models, including CreditMetrics, CreditRiskò, Portfolio Manager, and Portfolio
View, have a dynamic credit rating model but lack a credit risk pricing model
and market risk pricing model. While the lack of these components partially cripples
some models, it does not completely disable them. As such, these models are best
suited to products such as loans that are most sensitive to major credit events like
credit rating migration including defaults. Two such models for loans only are
discussed in Spinner (1998) and Belkin et al. (1998).