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Corporate Credit Risk Modeling: Quantitative Rating System And Probability Of Default Estimation

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Author Info
João Fernandes (Banco BPI)
Abstract

The 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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File URL: http://129.3.20.41/eps/fin/papers/0505/0505013.pdf
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Publisher Info
Paper provided by EconWPA in its series Finance with number 0505013.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 70 pages
Date of creation: 13 May 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0505013

Note: Type of Document - pdf; pages: 70
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Web page: http://129.3.20.41

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Related research
Keywords: 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: General - - - Estimation
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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  14. Jarrow, Robert A & Turnbull, Stuart M, 1995. " Pricing Derivatives on Financial Securities Subject to Credit Risk," Journal of Finance, American Finance Association, vol. 50(1), pages 53-85, March. [Downloadable!] (restricted)
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