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13

Apr, 2016

PD Calibration- A Delicate Balancing Act

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As discussed in our previous blog, PIT PD describes an expectation of the future, starting from the current situation and integrating all relevant cyclical changes & all values of the obligor idiosyncratic effect with appropriate probabilities. A PIT PD mimics the observed default rates over a period of time. TTC PDs, in contrast, reflect circumstances anticipated over an extremely long period, and thus nullify the effects of the credit cycle.

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2

Apr, 2016

Demystifying PD Terminologies

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A key metric that summarizes the credit worthiness of a bank’s obligor is the Probability of Default (PD). Besides credit worthiness assessment and capital computation under IRB, PD is one of the key metrics required in the updated IFRS 9 accounting standards. At present, there are many PD related terminologies used in the banking industry, such as: PIT PD, TTC PD, 12-month PD and so on. Such a wide spectrum of terminologies has led to confusion among users, especially when it comes to IFRS 9, which lays special focus on […]

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