Accurate credit-granting decisions are crucial to the efficiency of the decentralized capital allocation mechanisms in modern market economies. Credit bureaus and many financial institutions have developed and used credit-scoring models to standardize and automate, to the extent possible, credit...

Lenders use rating and scoring models to rank credit applicants on their expected performance. The models and approaches are numerous. We explore the possibility that estimates generated by models developed with data drawn solely from extended loans are less valuable than they should be because...

The measurement of credit quality is at the heart of the models designed to assess the reserves and capital needed to support the risks of both individual credits and portfolios of credit instruments. A popular specificatio for credit-rating transitions is the simple, time-homogeneous Markov...

The measurement of credit quality is at the heart of the models designed to assess the reserves and capital needed to support the risks of both individual credits and portfolios of credit instruments. A popular specification for credit rating transitions is the simple, time-homogeneous Markov...

This paper investigates whether differences in information- based trading can explain observed differences in spreads for active and infrequently traded stocks. Using a new empirical technique, we estimate the risk of information- based trading for a sample of NYSE listed stocks. We use the...

Emergence of new financial markets has led to fragmentation of order flows, leading to reduced liquidity in any particular market. Some markets are alleged to compete by focusing on quot;cream-skimmingquot; of uninformed trades, leaving informed trades to established markets. We develop a test...

Infrequently traded stocks tend to have higher bid-askspreads than frequently traded stocks. We use a new empirical technique to investigate the risk of information- based trading in active versus inactive stocks. We estimate the stochastic process of trades by maximum likelihood. Using a sample...

The problem in default probability estimation for low-default portfolios is that there is little relevant historical data information. No amount of data processing can fix this problem. More information is required. Incorporating expert opinion formally is an attractive option