The year 2002 was remarkably difficult on many fronts for most financial markets. For the high yield bond market, it was again a year of record amounts of defaults which contributed to low recovery rates and slightly negative absolute returns. (...)

The third-quarter 2002 default rate for high yield bonds was 4.95%, based on $37.48 billion of defaults. The quarterly default rate is the highest in history, surpassing the first quarter of 1991 rate of 4.80%.(...)

In recent years, credit risk has played a key role in risk management issues. Practitioners, academics and regulators have been fully involved in the process of developing, studying and analyzing credit risk models in order to find the elements which characterize a sound risk management system.(...)