# Questions tagged [default-probability]

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### How do I create Stress scenario to compute point int time Probability of Default using Vasicek Single Factor model? [closed]

I have GDP data as the single macroeconomic factor from 2009 to 2018 and have forecasted for 5 years till 2023. Using these forecasted GDP I can compute PIT PD using the equation: 𝑃𝐼𝑇 𝑃𝐷=𝑁((𝑁^(...
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### 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'...
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### Individual Credit Risk Data - Probability of Default

Given the current coronavirus-induced financial crisis and the possibility that it evolves in an economical crisis trough Companies (See: Credit Is the Scariest Market to Watch, Not the Dow or S&P)...
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### 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 ...
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### 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 ...
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### PD and LGD for ECL calculations needs to be time dependent?

I'm studying the implementation of an expected credit loss (ECL) model. I have encountered a complication. Do I need to calculate a probability of default (PD) and loss given default (LGD) with a time ...
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### Implied probability of default (CDS spread)

After some googling, I have made some progress but not enough to come to a conclusion, so here we go: Given that the CDS spread of a counterparty is 100bp (flat across time) and that the risk free ...
69 views

### PD calibration using Bayes formula

When calculating ECLs for loans under IFRS 9, one of the requirements is that the PD estimates have to be Point-in-time ($PD_{PIT}$) rather than through-the-cycle ($PD_{TTC}$).The setting is as ...
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### Conversion between physical and risk-neutral default probabilities

In the simple Merton structural credit risk model, the physical default probability is given by: $$DD_p = \frac{\ln(A / D) + (\mu -0.5\sigma^2)T}{\sigma \sqrt{T}}$$ $$P=N(-DD_p)$$ Assuming that ...
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### What relevance might the Modigliani-Miller theorem have for weight of evidence?

Suppose in computing weight of evidence based on financial ratios of some bank, one finds that their debt ratio and equity ratio have largely (you pick how large I guess) differing weights of evidence....
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### Problem of PD estimation [closed]

Why is small number of defaults is a problem in case of PD estimation? What are the consequences? Can you recommend notes, books, etc about the topic?
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### Portfolio diversification on default risk

A portfolio of 13 different companies have loans. Company $i$ default on their loan with probability $p_i$ and survive with prob $q_i=1-p_i$. Let $Y_i=1$ denote default. Question: How could I get to a ...