In this study, we consider the construction of through-the-cycle ("TTC") PD models designed for credit underwriting uses and point-in-time ("PIT") PD models suitable for early warning uses, considering which validation elements should be emphasized in each case. We build PD models using a long...

Using Indian bank-level data, we examine the cross-sectional returns predictability for banking stocks in view of the distinct industry parameters prevalent in the financial services space. We find the existence of abnormal returns in banking stocks. We also observe that the celebrated...

The article addresses the issue of stress testing based on the probability of bankruptcy and a rating migration matrix. The analysis is conducted on a sample of listed companies in Poland in the years 1998-2016, and the forecasts are made for the years 2016-2018. Particular attention is paid to...

The aggregation of individual risks into total risk using a weighting variable multiplied by two ratio variables representing incidence and intensity is an important task for risk professionals. For example, expected loss (EL) of a loan is the product of exposure at default (EAD), probability of...