For credit risk management purposes in general, and for allocation of regulatory capital by banks in particular (Basel II), numerical assessments of the credit-worthiness of borrowers are indispensable. These assessments are expressed in terms of probabilities of default (PD) that should...

For credit risk management purposes in general, and for allocation of regulatory capital by banks in particular (Basel II), numerical assessments of the credit-worthiness of borrowers are indispensable. These assessments are expressed in terms of probabilities of default (PD) that should...

Transfer risk can be an important risk factor for the estimation of a borrower's default risk, and thus has to be included into the PD estimations for the IRB approach under Basel II. In practice, there are two main methodologies for capturing transfer risk: the direct inclusion in the borrower...