A View into the Past - Efficient Validation of Default Probabilities

Abstract

We present a non-asymptotic approach to validate estimates of default probabilities that makes full use of the available information in default data. The results show that large banks do not necessarily have a competitive advantage on middle sized banks or well positioned small insititutes. The results can also be used to derive strategic implications for the data management of banks and rating agencies.

Note: Downloadable document is in German.

Keywords: Default probabilities, validation, credit risk

JEL Classification: C12, C13, C15