This paper proposes a methodology for default probability estimation for low default portfolios, where the statistical inference may become troublesome. The author suggests using logistic regression models with the Bayesian estimation of parameters. The piecewise logistic regression model and...

We will assume a chaotic (mixing) reality, can observe a substantially aggregated state vector only and want to predict one or more of its elements using a stochastic model. However, chaotic dynamics can be predicted in a short term only, while in the long term an ergodic distribution is the...