Related papers: Statistically distinguishable rating scale
This paper elaborates on the validation requirements for rating systems and probabilities of default (PDs) which were introduced with the New Capital Standards (Basel II). We start in Section 2 with some introductory remarks on the topics…
Inference about a scalar parameter of interest is a core statistical task that has attracted immense research in statistics. The Wald statistic is a prime candidate for the task, on the grounds of the asymptotic validity of the standard…
G-computation has become a widely used robust method for estimating unconditional (marginal) treatment effects with covariate adjustment in the analysis of randomized clinical trials. Statistical inference in this context typically relies…
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…
The Basel II internal ratings-based (IRB) approach to capital adequacy for credit risk plays an important role in protecting the Australian banking sector against insolvency. We outline the mathematical foundations of regulatory capital for…
Consider semiparametric estimation where a doubly robust estimating function for a low-dimensional parameter is available, depending on two working models. With high-dimensional data, we develop regularized calibrated estimation as a…
Randomly censored survival data are frequently encountered in applied sciences including biomedical or reliability applications and clinical trial analyses. Testing the significance of statistical hypotheses is crucial in such analyses to…
The inflated beta regression model is widely used for modeling continuous proportions with values at the boundaries. Maximum likelihood estimation for these models is well-known for its sensitivity to outliers, which can severely distort…
In banking practice, rating transition matrices have become the standard approach of deriving multi-year probabilities of default (PDs) from one-year PDs, the latter normally being available from Basel ratings. Rating transition matrices…
Econometricians have usefully separated study of estimation into identification and statistical components. Identification analysis, which assumes knowledge of the probability distribution generating observable data, places an upper bound…
Overrides of credit ratings are important correctives of ratings that are determined by statistical rating models. Financial institutions and banking regulators agree on this because on the one hand errors with ratings of corporates or…
Outlier detection algorithms typically assign an outlier score to each observation in a dataset, indicating the degree to which an observation is an outlier. However, these scores are often not comparable across algorithms and can be…
In this paper a robust version of the classical Wald test statistics for linear hypothesis in the logistic regression model is introduced and its properties are explored. We study the problem under the assumption of random covariates…
Risk management is an important practice in the banking industry. In this paper we develop a new methodology to estimate and predict the probability of default (PD) based on the rating transition matrices, which relates the rating…
Banks are required to use long-term default probabilities (PDs) of their portfolios when calculating credit risk capital under internal ratings-based (IRB) models. However, the calibration models and historical data typically reflect…
For the over-identified linear instrumental variables model, researchers commonly report the 2SLS estimate along with the robust standard error and seek to conduct inference with these quantities. If errors are homoskedastic, one can…
We consider Wald type statistics designed for joint predictability and structural break testing based on the instrumentation method of Phillips and Magdalinos (2009). We show that under the assumption of nonstationary predictors: (i) the…
Wald's sequential probability ratio test (SPRT) is a cornerstone of sequential analysis. Based on desired type-I, II error levels $\alpha, \beta$, it stops when the likelihood ratio crosses certain thresholds, guaranteeing optimality of the…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
Credit risk scorecards are logistic regression models, fitted to large and complex data sets, employed by the financial industry to model the probability of default of a potential customer. In order to ensure that a scorecard remains a…