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A new approach to the unconditional measurement of default risk

Listed author(s):
  • Alejandro Ferrer Pérez

    ()

    (Facultad de Ciencias Económicas. Universidad Complutense de Madrid.)

  • José Casals Carro

    (Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de Madrid.)

  • Sonia Sotoca López

    ()

    (Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de Madrid.)

Registered author(s):

    This paper analyzes the unconditional measurement of default risk and proposes an alternative modeling approach. We begin the analysis by showing that when conducted under non-stationarity, the objective of the unconditional measurement changes and that some relevant problems appear as a consequence of the sample dependence. Based on this result, we introduce our approach and discuss its consistency, practical advantages, and the main di erences from the conventional static framework. An empirical analysis is also conducted. Under non-stationarity, the regulatory model for the unconditional probability of default distribution performs badly when compared to our approach. Results also show that the capital gure presents a determinant and non-trivial dependence on the homogeneity and severity of the economic scenario represented in the sample.

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    File URL: http://eprints.ucm.es/25738/1/14111.pdf
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    Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico in its series Documentos de Trabajo del ICAE with number 2014-11.

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    Length: 12 pages
    Date of creation: Jun 2014
    Handle: RePEc:ucm:doicae:1411
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