Calibrating low-default portfolios, using the cumulative accuracy profile

Marco J. van der Burgt

Journal of Risk Model Validation

Abstract: ABSTRACT In the new Basel II Accord, banks are allowed to develop their own credit rating models. However, the lack of sufficient (default) data for backtesting rating models for “low-default portfolios” is a main concern for the financial industry and regulators. These low-default portfolios arecharacterized by the lack of sufficient data. In this article we present a method of calibrating low-default portfolios, based on modeling the observed power curve and deriving the calibration from this curve. The curve is determined by a concavity parameter, which can easily be related to the accuracy ratio (AR). The method is demonstrated for sovereign ratings.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk-model-validat ... ive-accuracy-profile (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ5:2161307

Access Statistics for this article

More articles in Journal of Risk Model Validation from Journal of Risk Model Validation
Bibliographic data for series maintained by Thomas Paine ().