Confidence intervals for probabilities of default

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• 作者：Samuel Hanson and Til Schuermann
• 关键词：Risk management ; Credit risk ; Bootstrap
• 刊名：Journal of Banking and Finance
• 出版年：2006
• 出版时间：August 2006
• 年：2006
• 卷：30
• 期：8
• 页码：2281-2301
• 全文大小：238 K

文摘

In this paper we conduct a systematic comparison of confidence intervals around estimated probabilities of default (PD) using several analytical approaches as well as parametric and nonparametric bootstrap methods. We do so for two different PD estimation methods, cohort and duration (intensity), with 22 years of credit ratings data. We find that the bootstrapped intervals for the duration-based estimates are relatively tight when compared to either analytic or bootstrapped intervals around the less efficient cohort estimator. We show how the large differences between the point estimates and confidence intervals of these two estimators are consistent with non-Markovian migration behavior. Surprisingly, even with these relatively tight confidence intervals, it is impossible to distinguish notch-level PDs for investment grade ratings, e.g. a PD_AA− from a PD_A+. However, once the speculative grade barrier is crossed, we are able to distinguish quite cleanly notch-level estimated PDs. Conditioning on the state of the business cycle helps: it is easier to distinguish adjacent PDs in recessions than in expansions.