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Navigable Slide Index

1. Introduction
2. Outline
3. Preface
4. Historical aspects of regulatory background
5. Rating and scoring
6. Different ways to develop internal rating systems
7. Validation in the IRB approach
8. Quantitative aspects of validation in IRB approach
9. Quantitative requirement and consequences
10. Some conceptual consideration
11. Basic setting
12. Joint distribution with conditional densities
13. Joint distribution with conditional PDs
14. Equivalence of the both descriptions
15. Comment on conditional PDs
16. Dealing with cyclical effects
17. The situation in practice
18. Conditional densities of the score function
19. Conditional PD as a function of score
20. Back-testing the correctness of conditional PDs
21. Mapping score values on rating grades - 1st case
22. Defining the mapping in the 1st case
23. Mapping score values on rating grades - 2nd case
24. Defining the mapping in the 2nd case
25. Monotonicity of conditional PDs
26. Stating the problem in terms of test theory
27. The test theory in matematical terms
28. The Neyman Pearson lemma
29. Characterizing the optimal test
30. Cut off decision rules
31. Conclusions for practical applications

Topics Covered

• Historical background
• New capital standards (Basel II)
• Requirements on quantitative validation
• The binary classification model for rating systems
• Bayes' formula
• Modeling cyclical effects
• Conditional probabilities of default (PD)

Links

Series:

• Quantitative Financial Risk Management

Categories:

• Finance, Accounting & Economics

Talk Citation

Publication History

• Published on October 1, 2007
• Archived on April 4, 2022