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Probability of Default (PD)

2022
The following sections are included: Default Definition Rating System Rating System Concept Rating Grades PD Estimation Methods Probit and Logit Models Calibration Bernoulli Distribution and Binomial Process Time Scaled Default Probabilities Time Scaled Rating Transitions Modeling Tails Additional Thoughts on ...
Giuseppe Orlando, Michele Bufalo, Henry Penikas, Concetta Zurlo   +3 more
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Confidence intervals for probabilities of default

Journal of Banking & Finance, 2005
In this paper we conduct a systematic comparison of confidence intervals around estimated probabilities of default (PD) using several analytical approaches as well as parametric and nonparametric bootstrap methods. We do so for two different PD estimation methods, cohort and duration (intensity), with 22 years of credit ratings data.
Samuel Gregory Hanson, Til Schuermann
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Modeling default probabilities: The case of Brazil [PDF]

Journal of International Financial Markets, Institutions and Money, 2011
Abstract Using disaggregated data from the Brazilian stock market, we calculate default probabilities for 30 different economic sectors. Empirical results suggest that domestic macroeconomic factors can explain these default probabilities. In addition, we construct the Minimum Spanning Tree (MST) and the ultrametric hierarchical tree with the MST ...
Benjamin M. Tabak, Daniel O. Cajueiro, A. Luduvice   +2 more
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Estimation of Default Probabilities and Default Correlations

2005
This paper provides estimators for the default probability and default correlation for a portfolio of obligors. Analogously to rating classes, homogeneous groups of obligors are considered. The estimations are made in a general Bernoulli mixture model with a minimum of assumptions and in a single-factor model.
Stefan Huschens, Konstantin Vogl, Robert Wania   +2 more
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Estimation of Default Probabilities ­ Part 3: Stochastic Default Probabilities: Credit Risk+

SSRN Electronic Journal, 2003
The article provides a detailed analysis of the approach to estimate firms' default probabilities as it is proposed in the Credit Risk+ portfolio model. It is shown that systematic estimation errors occur in the methodology that also carry over to credit portfolio risk management.
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Dynamics of probabilities of default

Probabilities of default (PDs) of loans are of central importance for financial stability. We analyze the PDs, reported quarterly by German financial institutions to Deutsche Bundesbank. The development of PDs is modelled as an AR process of PD changes and an initial PD.
Bednarek, Peter, Franke, Günter
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Calibration of the default probability model

European Journal of Operational Research, 2008
Abstract In this paper, we study the calibration problem for the Merton–Vasicek default probability model [Robert Merton, On the pricing of corporate debt: the risk structure of interest rate, Journal of Finance 29 (1974) 449–470]. We derive conditions that guarantee existence and uniqueness of the solution.
Alexander Kreinin, Ahmed Nagi
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