Estimation of Default Probabilities - Part 1: The Mean Value Model
RiskNEWS, May 2002
12 Pages Posted: 20 Mar 2003
The most common method to assess firms' and private customers' default probabilities - the estimation of default probabilites through long term mean default rates, also referred to as the mean value model - is based upon the use of external or internal ratings.
The article provides an evaluation of the properties of the estimation and defines rules for its application that help minimize the estimation error.
Note: The downloadable document is written in German.
JEL Classification: C13, G28
Suggested Citation: Suggested Citation