Optimal Simultaneous Validation Tests of Default Probabilities, Dependencies, and Credit Risk Models
Wehrspohn GmbH & Co. KG; University of Wuerzburg
May 15, 2004
We provide a general, model-independent approach to the construction of optimal simultaneous validation tests of credit default probabilities, dependencies between creditors, and credit risk models that maximize the power of test for any given portfolio-size and number of periods of data available. Results can be used to validate banks' estimates of rating default probabilities, correlations and choice of credit risk models in the Basel II supervisory review process. Example-analyses are given for the generalized asset value model.
Number of Pages in PDF File: 11
Keywords: Rating validation, backtesting, model validation, banking regulation
JEL Classification: C5, C52working papers series
Date posted: September 18, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 1.187 seconds