The Probability of Default Under IFRS 9: Multi-period Estimation and Macroeconomic Forecast

Tomáš Vaněk and David Hampel
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Tomáš Vaněk: Department of Statistics and Operation Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2017, vol. 65, issue 2, 759-776

Abstract: In this paper we propose a straightforward, flexible and intuitive computational framework for the multi-period probability of default estimation incorporating macroeconomic forecasts. The concept is based on Markov models, the estimated economic adjustment coefficient and the official economic forecasts of the Czech National Bank. The economic forecasts are taken into account in a separate step to better distinguish between idiosyncratic and systemic risk. This approach is also attractive from the interpretational point of view. The proposed framework can be used especially when calculating lifetime expected credit losses under IFRS 9.

Keywords: credit risk; economic forecast; IFRS 9; Markov chains; probability of default (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2017065020759

DOI: 10.11118/actaun201765020759

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