# Questions tagged [default-probability]

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### 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 ...
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### LGD/PD Databases

I am trying to compare LGD/PD for Banks and other financial institutions using different approach thank Merton. Are there any publicly available data on which I can build? Thanks.