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ARTICLE

Model Validation for Credit Risk: A Critical Deficiency in the Jeffreys Test

May 13, 2022 | A loan portfolio with zero defaults over, say, the past 12 months, is generally considered ...

ARTICLE

Basel III: The Impact of the New Probability of Default Input Floor

Feb 11, 2022 | In 2023, as part of a Capital Requirements Regulation (CRR3) amendment, the probability of default ...

ARTICLE

How to Improve LGD: Unlocking the Generalized Area Under the Curve

Jan 14, 2022 | It is difficult to gauge the performance of loss-given default (LGD) models, partly because it’s ...

ARTICLE

The Changing Credit Risk Management Landscape at European Banks

Nov 12, 2021 | Throughout 2021, European banks have devoted considerable time to reassessing and recalibrating ...

ARTICLE

Model Risk: Why Size Matters for Banks

Oct 8, 2021 | As a general rule, the bigger the bank, the more sophisticated its credit-risk models. But ...

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Credit Risk Measurement: Alternatives for PD-LGD-EAD on the Horizon?

Even after 40 years, the PD-LGD-EAD framework is still going strong – but models with more power and greater predictive accuracy are lurking. Though...

Friday, February 7, 2025

Stress Testing: A Practical Guide

Banks and regulators remain committed to stress testing. What are the different types of tests and approaches, and what elements are necessary to...

Friday, January 31, 2020

IFRS 9 and Probability of Default: A Web of Confusion

The proper calculation of probability of default is crucial for European banks that need to comply with IRFS 9, the forward-looking financial...

Friday, April 11, 2025

Probability of Default: How to Pass the Jeffreys Test and Improve Predictive Ability

To back-test PD and meet the European Central Bank's validation requirements for measurement of defaults, many banks use a predictive ability tool...

Friday, September 18, 2020

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ARTICLE

Probability of Default: The Pluses and Minuses of Transition Matrices

Aug 13, 2021 | Transition matrices measure the transition probabilities for credit-risk ratings over specific time ...

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Beyond Probability of Default: How to Expand the Use of the Jeffreys Test

Jul 9, 2021 | The Jeffreys test is the most important diagnostic tool for assessing the calibration of the bucket ...

ARTICLE

The Riskiness of Small Banks vs. Large Banks: Size Matters

Jun 11, 2021 | Bigger is better. At least, it seems, with respect to the riskiness of banks. The capital, ...

ARTICLE

The Skewed Generalized T Distribution: A Swiss Army Knife for Tail Risk

Apr 9, 2021 | Every risk professional knows that price shifts can widely diverge. Daily or weekly returns can go ...

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