Download This PaperOptimal Simultaneous Validation Tests of Default Probabilities, Dependencies, and Credit Risk Models
11 Pages Posted: 18 Sep 2004
Date Written: May 15, 2004
Abstract
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.
Keywords: Rating validation, backtesting, model validation, banking regulation
JEL Classification: C5, C52
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The New Basel Accord and Questions for Research
By Marc R. Saidenberg and Til Schuermann
-
Analytic Loss Distributions of Heterogeneous Portfolios In The Asset Value Credit Risk Model
-
Estimation of Default Probabilities - Part 5: Integrated Models - the Credit Risk Evaluation Model
-
Generalized Asset Value Credit Risk Models and Risk Minimality of the Classical Approach
-
Bayesian Multi-Period Model for Assessing Credit Loss Distributions vs. Basel Ii Model
-
Estimation of Default Probabilities Part 3: Stochastic Default Probabilities: Credit Risk+
-
Assessing Validity of the Basel Ii Model in Measuring Risk of Credit Portfolios