Default Estimation and Expert Information: All Likely Dataset Analysis and Robust Validation
AbstractDefault is a rare event, even in segments in the midrange of a bank's portfolio. Inference about default rates is essential for risk management and for compliance with the requirements of Basel II. Most commercial loans are in the middle-risk categories and are to unrated companies. Expert information is crucial in inference about defaults. A Bayesian approach is proposed and illustrated using a prior distribution assessed from an industry expert. The method of All Likely Datasets, based on sufficient statistics and expert information, is used to characterize likely datasets for analysis. A check of robustness is illustrated with an epsilon-- mixture of priors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 07-11.
Date of creation: Jul 2007
Date of revision:
Contact details of provider:
Postal: 402 Uris Hall, Ithaca, NY 14853
Phone: (607) 255-9901
Fax: (607) 255-2818
Web page: http://www.arts.cornell.edu/econ/CAE/workingpapers.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Umesh Gavasakar, 1988. "A Comparison of Two Elicitation Methods for a Prior Distribution for a Binomial Parameter," Management Science, INFORMS, INFORMS, vol. 34(6), pages 784-790, June.
- Garthwaite, Paul H. & Kadane, Joseph B. & O'Hagan, Anthony, 2005. "Statistical Methods for Eliciting Probability Distributions," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 100, pages 680-701, June.
- Pamela Nickell & William Perraudin & Simone Varotto, 2001.
"Stability of ratings transitions,"
Bank of England working papers
133, Bank of England.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.