Starting from the Merton framework for firm defaults, we provide the analytics and robustness of the relationship between default correlations. We show that loans with higher default probabilities will not only have higher variances but also higher correlations between loans. As a consequence,...

The importance of credit risk assessment and monitoring has increased since the recent financial turmoil. This paper presents a toolkit for credit risk modeling that follows the top-down approach proposed by Wilson (1997). The analysis is conducted separately for the household and corporate...

In order to reduce its capital requirement, banks use different credit risk models that are able to detect de difference between defaulter and a non-defaulter customer. In this paper I aim to make a comparison between these models and more to see which ones improve most when a macroeconomic...

We develop a framework to assess the statistical significance of expected default frequency as calculated by credit risk models. This framework is then used to analyze the quality of two commercially available models that have become popular among practitioners: KMV Credit Monitor and RiskCalc...

A binomial logit model was used to analyze relationships between financial characteristics and loan performance for FSA direct borrowers receiving direct FO or OL loans in fiscal 2005. Not surprisingly, the results indicate a strong and direct relationship between many key financial variables...

A credit risk model suitable for agricultural lenders is identified. The model incorporates sector correlations and is applied to the loan portfolio of an agricultural credit association to create a distribution of loan losses. The distribution is used to derive the lender’s expected and...

Starting from the Merton framework for firm defaults, we provide the analytics and robustness of the relationship between default correlations. We show that loans with higher default probabilities will not only have higher variances but also higher correlations between loans. As a consequence,...

Regions vary strongly according to the participation of firms in R&Dactivity.By linking data on R&D activity at thefirm level with GIS based data on economic, and other locationfeatures of zoneswe are able to investigate the impactof local factors on R&D involvement for various types of...

In travel surveys most respondents apply rounding of departure andarrival times to multiples of 5, 15 and 30minutes: in the annual Dutch travel survey about 85-95 percent of allreported times are 'round' ones. We estimaterounding models for departure and arrival times. The model allows oneto...

In this work we consider modeling the past volatilities through a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model using the Bayesian approach. Asymmetries in the shocks are accommodated by smooth transition models for the variance. We discuss problems related to the...