2
$\begingroup$

I have a credit loss curve for 36 months and I want to transform that curve into a 20 months curve without changing its final loss. My credit loss vector is a % of unpaid principal balance in a specific period.

For example, let's say I have a curve like this V(i)={1%;2%;3%;4%}. If I would calculate the total loss for that curve, it would be Loss=[1-(1*(1-V(1))*(1-V(2))*(1-(V3))*(1-V(4))] → Loss = 9.65%

How could I create a similar curve that achieves the exactly same loss for a smaller period (in this example, let's say 3 periods), while maintaining the proportion similar across all periods?

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.