This paper explains and documents many issues related to default prediction based on financial statements. The underlying methodology is completely revealed and addresses many important practicalities in empirical default estimation. Test statistics are also provided on various models using our...

In this paper we succinctly outline the modeling approach of Moody's for private firm default prediction. The processes of transforming ratios, weighting the transformations, and mapping to a default probability are examined. Accounting ratios in the US, Canada, and Australia are compared and...