A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Credit risk stress tests can misrepresent default probabilities due to inconsistent parameterization.
Model credit ratings using economic states with Markov chains.
If the probability of default parameters (PDs) fed as input into a credit portfolio model are estimated as through-the-cycle (TTC) PDs stressed market conditions have little impact on the results of the capital calculations conducted with the model. At first glance, this is totally different if the PDs are estimated as…
Paper presents a method for estimating long-term PDs with incomplete data.
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of the obligors, their last known default rates, and a measurement of the systematic …