Economics and Finance


Approach for Multi-Period PD Calibration for LDP Portfolios.

Authors: Denis Surzhko, Rainer Glaser

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.

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Submission history

[v1] 2014-04-01 09:08:34

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