The Two-Parameter Formula of Default Probability Term Structure

Журнал «Дайджест-Финансы»
т. 23, вып. 4, декабрь 2018

Получена: 14.06.2018

Получена в доработанном виде: 02.07.2018

Одобрена: 17.07.2018

Доступна онлайн: 24.12.2018


Коды JEL: C58, G17, G28

Страницы: 419–432


Pomazanov M.V. National Research University Higher School of Economics, Moscow, Russian Federation 

SPIN-код: отсутствует

Subject The article discusses the existing methods to model the term structure of default probability and their drawbacks affecting the practical use.
Objectives The research is aimed to make effective suggestions to creditors on setting the technique to evaluate the probability of the corporate borrower's default, considering a changeable term before the loan deal ends, without contradicting IFRS 9 – Financial Instruments.
Methods The research represents the economic and statistical analysis, optimizes aspects of special distributions based on statistical data of rating agencies.
Results I refer to consolidated empirical data of rating agencies on the corporate sector to substantiate the two-parameter formula of term structure of default probability, which does not contradict IFRS 9 with respect to corporate borrowers. In this case, internal bank data are insufficient to build the separate internal model PD Lifetime or this process is too arduous.
Conclusions and Relevance I substantiate the default probability term structure formula, which is best in the pool of fitting distributions, being calibrated with empirically and statistically representative external data of rating agencies, covering a 44-year period. The formula is explicit, without implying complex calculations. The formula may prove useful in calculating the rate of reserves for loan assets, with their terms being coordinated with the principle lending mechanism (SPPI test) with respect to the second impairment phase under the classification given in IFRS 9.

Ключевые слова: credit risk, IFRS reserves, default probability, default term structure, IFRS 9

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ISSN 2311-9438 (Online)
ISSN 2073-8005 (Print)

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т. 23, вып. 4, декабрь 2018

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