This work is licensed under the Creative Commons Attribution International License (CC BY). Received 8 June 2014; revised 15 July 2014; accepted 3 August 2014 ABSTRACTThe intention of this paper is to propose extension to the Pluto and Tasche PD calibration model for low default portfolios that could produce more stable LRDF estimates and eliminate the necessity of quartile choice, while preserving adequate level of conservatism.
Multi-period Pluto and Tasche model allows us to fulfill Basel committee requirements regarding long-term LRDF calibration even for portfolios with no observable defaults.
It provides an estimate of the likelihood that a client of a financial institution will be unable to meet its debt obligations.
PD is a key parameter used in the calculation of economic capital or regulatory capital under Basel II for a banking institution.
In financial accounting, assets are economic resources.
Ultra-low default portfolio is the portfolio for which we haven’t got enough historical defaults to estimate discriminatory power of the ranking model (e.g.
In this article, the definitions of various relevant performance indicators such as selectivity, specificity, accuracy, precision, linearity, range, limit of detection, limit of quantitation, ruggedness, and robustness are critically discussed with a view to prevent their erroneous usage and ensure scientific correctness and consistency among publications.
The benefit of accelerated testing is to save time and money while quantifying the relationships between stress and performance along with identifying design and manufacturing deficiencies to get useful data quickly and at low cost to determine the products strength limits by applying stresses high enough to stimulate failures.
However, some of the relevant parameters recommended by regulatory bodies are often used interchangeably and incorrectly or are miscalculated, due to few references to evaluate some of the terms as well as wrong application of the mathematical and statistical approaches used in their estimation.
These mistakes have led to misinterpretation and ambiguity in the terminology and in some instances to wrong scientific conclusions.