The Bloomberg Corporate Default Risk Model (DRSK) for Private Firms

Abstract

The DRSK private firm model produces estimates of real-world default probabilities (DPs) for private companies. The product covers all firms for which the requisite data is available, providing point in time DP term structures for about 500,000 private firms globally.

This year, we are recalibrating the model to account for changes made in the DRSK public firm model. The recalibration includes various enhancements to bring the private model more in alignment with the public model. The new model largely improves accuracy ratios and R-squared values. We describe the new model, analyze its performance and compare it to the previous model.

Keywords: DRSK, private firms, real-world default probability, distance to default, credit risk, logistic regression

JEL Classification: C55, C58, G19