In the paper we propose PD calibration framework for LDP that allows producing smooth non-zero PD estimates for any given time horizon within the length of economic cycle. The advantages of the approach is that produced PDs are consistent with two main anchors – PIT and TTC PD estimates and are subject to smooth, monotonic transition between those two anchors. In practise, proposed framework could be applied to risk-based pricing of mid-term deals, whose duration is too long compared with PIT PD horizon and significantly shorter that the length of the whole economic cycle.
Comments: 7 Pages.
[v1] 2014-04-01 09:08:34
Unique-IP document downloads: 1340 times
Vixra.org is a pre-print repository rather than a journal. Articles hosted may not yet have been verified by peer-review and should be treated as preliminary. In particular, anything that appears to include financial or legal advice or proposed medical treatments should be treated with due caution. Vixra.org will not be responsible for any consequences of actions that result from any form of use of any documents on this website.
Add your own feedback and questions here:
You are equally welcome to be positive or negative about any paper but please be polite. If you are being critical you must mention at least one specific error, otherwise your comment will be deleted as unhelpful.