# Questions tagged [default-probability]

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### IFRS 9 PiT-PD model when the lagged dependency exceeds one year

It is a common approach to model the point-in-time PD (PiT PD; meaning that the PD depends on the current or lagged economy) by regressing default rates on current or past macro variables (such as GDP ...
36 views

### Understanding the application of Asset-Correlation to credit risk models

Suppose we have a portfolio of $n$ credits. In order the estimate the Portfolio Value at Risk (99,9) we use a standard vasicek model with the Ability to pay variable $A_i=\sqrt{\rho}x+\sqrt{1-\rho}z_i$...
41 views

### How to construct the probability of default (PD) with not much historical data (<1 year)?

If a financing company has a new funding program, is there a statistical method that can be used to construct a probability of default (PD) for IFRS 9 ECL calculation purposes? Considering that ...
43 views

### How to calculate VaR on loss distribution

I sorted simulated portfolio losses in ascending order (sorted_losses variable). X-axis is loss, Y-axis probability of loss. I want to calculate 95% Value at risk in R. I used the below code, but am I ...
25 views

### Interpretation of data for Market Premium

I am given some preliminary data with a goal to estimate the probability of default. This data consists of Market premium for different tenors. One such example ...
1 vote
51 views

### Annualized Default Probabilities (short term dp's larger than long term dp's)

Was looking at some sourced data and noticed that a 4 year annualized default probability was greater than a 5 year annualized default probability. This seems counter intuitive even in the case that ...
1 vote
110 views

### Interpretation of coefficients of a Probit model [closed]

The exact problem I am trying to solve is as follows. I have a Probit specification: $$P_t = \Phi(\beta^T x_t)$$ where $\Phi$ is a standard normal CDF and $x$ is a matrix of independent variables ...
60 views

### Assessing Credit Rating Agencies [closed]

Has there been any historical evaluation of the quality of credit ratings provided by agencies such as Fitch, S&P, and Moody's? Are there any academic resources available on this topic? I have ...
709 views

### Recovery Rates in CDS valuation

I am pricing CDS calibrating the default probabilities intensities using CDS spreads from Markit. Those spreads are given with a recovery. I have two questions regarding the recovery: In Option, ...
1 vote
138 views

### Help with simple derivation of probability of credit default

I'm going over a chapter in Hull's Options, Futures, and Other Derivatives and am stuck on how the probability of default is derived. Here's the image of the derivation. I can follow all of it except ...
1 vote
323 views

1 vote
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### Where can I find recent tables with the average cumulative default rates?

I'm mostly interested in Moody's average corporate cumulative default rates, possibly in 2020 or the latest version. I tried to take a look at Moody's website but I am still in trouble. The latest ...
32 views

2k views

### Use of PIT vs TTC PD in a Merton one-factor model

Under one-factor Merton framework, like Basel, you use unconditional PDs as input of the portfolio model and this "unconditional" means it is a TTC-PD. Given a i-th borrower, the default ...
567 views

### CVA Probability of default

I have to estimate CVA for an exotic option. I used Monte Carlo method to price the option with 1000 number of simulation, maturity = 1 year, and 360 time steps. So I have two questions: I've read in ...
1 vote
39 views

### Definition of defaults via unobserved assets

Sorry if my question is a bit basic. I am considering the default model as used eg in Vasicek (I think this goes back at least to Merton, though) that looks at an unobserved quantity modeling the ...
91 views

### A model for probability of credit rating change for a single issuer

I am looking to model the probability of a single issuer upgrading or downgrading it's credit rating at some time using historical data. I have done research and everything I have found so far are for ...
66 views

### Credit Migration: Risk [duplicate]

Hi I am given two tables of two tables showing data about fictional corporate business partners and relevant credit risk data – ID, rating, probability of default (PD, defined by rating), loss given ...
343 views

I'm looking for an Excel spreadsheet where the CreditRisk+ model is implemented by means of a simple toy example, like the one the linked paper is referring to. If that spreadsheet is unavailable, I ...
239 views

### MATLAB - Probability Default with CDS Bootstrapping

I have not understood which "zerorati" I must use for the bootstrap of the PD from the curve of the CDS spreads. Can you help me please? I consulted O'Kane (2008) and Brigo and Mercurio (2006), but I'...
345 views

### Derivation of the 99.9% CI to a 1 in a 1000 year event

Keen to understand how BASEL derived the 1 in a 1000 year event from the CI 99.9%: The confidence level is fixed at 99.9% (0.999) (i.e. a bank is expected to suffer losses that exceeds its capital ...
1k views

### Marginal Probability of Default for Credit Risk

I am working on a model to predict credit defaults. We have worked out PD's of clients using logistic regression. When calculating the default amount, we have to convert PDs to marginal PDs. The ...
1 vote
270 views