A high-quality and granular probability of default (PD) model is on many practical dimensions far superior to any categorical credit rating system. Business adoption of a PD model, however, needs to factor in the long-established business/regulatory conventions built around letter-based credit...

Defaults in a credit portfolio of many obligors or in an economy populated with firms tend to occur in waves, reflecting their sharing of common risk factors and/or having systemic linkages via credit chains. One popular approach to characterizing defaults in is the Poisson intensity model...