Corporate Credit Risk Modeling: Quantitative Rating System And Probability Of Default Estimation
AbstractThe literature on corporate credit risk modeling for privately-held firms is scarce. Although firms with unlisted equity or debt represent a significant fraction of the corporate sector worldwide, research in this area has been hampered by the unavailability of public data. This study is an empirical application of credit scoring and rating techniques applied to the corporate historical database of one of the major Portuguese banks. Several alternative scoring methodologies are presented, thoroughly validated and statistically compared. In addition, two distinct strategies for grouping the individual scores into rating classes are developed. Finally, the regulatory capital requirements under the New Basel Capital Accord are calculated for a simulated portfolio, and compared to the capital requirements under the current capital accord.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0505013.
Length: 70 pages
Date of creation: 13 May 2005
Date of revision:
Note: Type of Document - pdf; pages: 70
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Credit Scoring; Credit Rating; Private Firms; Discriminatory Power; Basel Capital Accord; Capital Requirements;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
- NEP-CFN-2005-05-23 (Corporate Finance)
- NEP-FIN-2005-05-23 (Finance)
- NEP-RMG-2005-05-23 (Risk Management)
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