Developing, Validating, and Monitoring a PD Model for Foundation IRB Approach

Van Phuong Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: Assuming that a given bank wants to comply with the Basel Accord requirements, in particular the Foundation IRB approach. Accordingly, it has to develop a PD model to predict the probability of default of its borrower within one year. Hence, this paper aims to present a simply empirical procedure for developing, validating, and monitoring a PD model.

Keywords: \textbf{Keywords:} Basel Accord II; Loss Distribution; Expected Loss; Unexpected Loss; Risk Components; VaR; CAR; Model Validation and Monitoring; AUROC; CAP; PSI. (search for similar items in EconPapers)
JEL-codes: G00 G10 G11 G20 G21 (search for similar items in EconPapers)
Date: 2019-10-02
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:100628

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