Banks using either the Foundation or Advanced option of the Internal Ratings Based approach to credit risk under Basel II must estimate long-run annual average default probabilities for buckets of homogeneous assets. The one-factor model underlying the capital calculations in Basel II has...

A semi-Markov model of turnover, resulting from optimizing behavior on the part of workers, is developed. Duration dependence in the transition out of employment is modelled as resulting from a layoff probability which decreases with tenure. Some preliminary results, based on DIME data, are...