Innovative Approach for Forecasting Corporate Default Risk

Prashant Kumar Behera

Journal of Global Economy, 2018, vol. 14, issue 2, 106-119

Abstract: :Present time corporate default risk parameters are dynamic in nature and understanding how these parameters change in time is a fundamental task for risk management. In this research paper I am trying to forecast for corporate default rates. Â I work with historical credit migrations data to construct some time series of interest and to visualize default rates dynamics and also, I use some of the series constructed and some additional data to fit a forecasting model for corporate default rates and to shows some back testing and stress testing. A linear regression model for corporate default rates is presented but the tools and concepts described can be used in combination with other forecasting methodologies.

Keywords: Default risk; back testing; stress testing and transition matrix (search for similar items in EconPapers)
JEL-codes: D8 I2 (search for similar items in EconPapers)
Date: 2018
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