{"title":"Estimating default probabilities for no- and low-default portfolios: parameter specification via floor constraints","authors":"Oliver Blümke","doi":"10.1093/jrsssc/qlad061","DOIUrl":null,"url":null,"abstract":"\n For low- and no-default portfolios, financial institutions are confronted with the problem to estimate default probabilities for credit ratings for which no default was observed. The Bayesian approach offers a solution but brings the problem of the parameter assignment of the prior distribution. Sequential Bayesian updating allows to settle the question of the location parameter or mean of the prior distribution. This article proposes to use floor constraints to determine the scale or standard deviation parameter of the prior distribution. The floor constraint can also be used to determine the free parameter γ in the Pluto–Tasche approach.","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":null,"pages":null},"PeriodicalIF":16.4000,"publicationDate":"2023-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"100","ListUrlMain":"https://doi.org/10.1093/jrsssc/qlad061","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
引用次数: 0
Abstract
For low- and no-default portfolios, financial institutions are confronted with the problem to estimate default probabilities for credit ratings for which no default was observed. The Bayesian approach offers a solution but brings the problem of the parameter assignment of the prior distribution. Sequential Bayesian updating allows to settle the question of the location parameter or mean of the prior distribution. This article proposes to use floor constraints to determine the scale or standard deviation parameter of the prior distribution. The floor constraint can also be used to determine the free parameter γ in the Pluto–Tasche approach.
期刊介绍：
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.
京公网安备 11010802042870号
京ICP备2023020795号-1
分享
求助内容：
应助结果提醒方式：
扫码关注我们
