We propose a model selection methodology for credit default modeling in the presence of a large number of variables and candidate models. Accurate credit default models are critical to financial institutions for making effective underwriting and pricing decisions in terms of profit maximization...

Ratings measure the counterparty risk for an issuer or an issue while CDs are a market evaluation of the same risk exposure. The market evaluation could be not aligned with the rating agencies' judgment and the difference could be relevant. The article presents an empirical analysis on a sample...