The problem in default probability estimation for low-default portfolios is that there is little relevant historical data information. No amount of data processing can …x this problem. More information is required. Incorporating expert opinion formally is an attractive option.

This is a position paper concerning the role of empirical studies of human default reasoning in the formalization of AI theories of default reasoning. We note that AI motivates its theoretical enterprise by reference to human skill at default reasoning, but that the actual research does not make any use of this sort of information and instead relies on intuitions of individual investigators. We...

unreliability of financial statements in iran has urged this country’s financial services industry management to manipulate practices by which they could gain reliable risk scores for borrowers. this research extracts the most influential qualitative factors that would impact the default of a business relationship borrower. solicitation of the factors is done through delphi methodology. the mea...

This paper studies how default varies with aggregate income. We analyze a model in which optimal contracts enable risk sharing of privately observed, idiosyncratic income by allowing for default. Default provisions allow agents with low idiosyncratic income realizations to repay less and thus provide insurance. Default penalties ensure that only these agents default. We show that default can oc...

The present paper aimed at studying the current models of credit portfolio management. There are currently three types of models which consider the risk of credit portfolio: the structural models (Moody's KMV model, and Credit- Metrics model), the intensity models (the actuarial models) and the econometric models (the Macro-factors model). The development of these three types of models is based...

The Basel II Accord pointed out benefits of credit risk management through internal models to estimate Probability of Default (PD). Banks use default predictions to estimate the loan applicants’ PD. However, in practice, PD is not useful and banks applied credit scorecards for their decision making process. Also the competitive pressures in lending industry forced banks to use profit scorecards...

Using the reduced form framework with inter-dependent default correlation, we perform valuation of credit default swap with counterparty risk. The inter-dependent default risk structure between the protection buyer, protection seller and the reference entity in a credit default swap are characterized by their correlated default intensities, where the default intensity of one party increases whe...