Managing Credit Risk in Corporate Bond Portfolios

The increasing complexity of credit markets necessitates a robust risk management framework, particularly in portfolio management. Your client, a pension fund, has expressed concerns about the credit risk associated with its significant investments in corporate bonds. They have asked for your guidance on how to evaluate, mitigate, and manage this credit risk in their portfolio. Discuss the key steps you would recommend for assessing credit risk, the tools and techniques that can be employed to mitigate this risk, and how to structure an ongoing monitoring process. Include relevant considerations specific to the current market environment.