I am approaching you with one important for me question.
I have a task to calculate probability of default for our clients. I used an Altman Z-Score model to calculate the Z-Scores for each client.
Question N 1: Could you advise me how can I transform this Z-score to Probability of Default rate(%)?
The second, I am not fully satisfied with the results of Altman model, because, for example, one of our clients has an internal risk class 5 (it means, that it is in a risky zone), but the Z-Score I calculate for this client is quite high, and vice versa.
Question N 2: Can I transform our internal risk classifications (1,2,3....8) to probability of default rate (%)? If I can, how? If it is possible, I will write on which criterias we define our internal risk classifications.
Thanks a lot.