Credit Risk

Lecture 8 of APM466/MAT1856 at the University of Toronto 2026. We introduce the concept of credit risk using a business case of the famous Goodrich swap of 1983, deriving the cash flow valuation formula, sovereign debt and valuation and the Markov model used by credit rating agencies. Video provided to students at the University of Toronto. Allowance is made for fair use for purposes such as criticism, comment, news reporting, scholarship, and research. Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favour of fair use. Content is provided as a whole, any reproduction in part could be misleading and is not allowed.