A new approach to the unconditional measurement of default risk

Alejandro Ferrer Pérez (), José Casals Carro and Sonia Sotoca López ()
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Alejandro Ferrer Pérez: Facultad de Ciencias Económicas. Universidad Complutense de Madrid.
José Casals Carro: Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de Madrid.
Sonia Sotoca López: Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa). Universidad Complutense de Madrid.

No 2014-11, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper analyzes the unconditional measurement of default risk and proposes an alternative modeling approach. We begin the analysis by showing that when conducted under non-stationarity, the objective of the unconditional measurement changes and that some relevant problems appear as a consequence of the sample dependence. Based on this result, we introduce our approach and discuss its consistency, practical advantages, and the main di erences from the conventional static framework. An empirical analysis is also conducted. Under non-stationarity, the regulatory model for the unconditional probability of default distribution performs badly when compared to our approach. Results also show that the capital gure presents a determinant and non-trivial dependence on the homogeneity and severity of the economic scenario represented in the sample.

Keywords: Default risk; Probability of default; Unconditional measurement; Conditional measurement. (search for similar items in EconPapers)
JEL-codes: C46 C58 G21 G32 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2014-06
New Economics Papers: this item is included in nep-rmg
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