Estimating and validating long run probability of default
With these Vasicek models, asset correlation and long-run PD for a risk homogenous po...With these Vasicek models, asset correlation and long-run PD for a risk homogenous portfolio both have analytical solutions, longer external time series for market and macroeconomic variables can be included, and the traditional asymptotic maximum likelihood approach can be shown to be equivalent to least square regression, which greatly simplifies parameter estimation. The analytical formula for long-run PD, for example, explicitly quantifies the contribution of uncertainty to an increase of long-run PD. Fitting Nonlinear Mixed Models with the New NLMIXED Procedure. Basel II Validation Webinar: Estimation of Downturn LGD and Long Run Probability of Default Bogie Ozdemir Vice President, Standard & Poors Risk Solutions Peter Miu Assistant Professor of Finance – De Groote School of Business at Mc Master University April 1, 2008 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors.
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