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PD is commonly used in risk management with the concept of “through the cycle (TTC)”. It is conceptually different to requirements in IFRS 9 which requires looking forward over the lifetime of a financial instrument while considering economic scenarios.

Different components need to be selected, depending on whether a customer decides (Variant A) to use the transfer of today's PD from capital requirements In FlexFinance, one can decide which of the following variants shall be used:

• Variant A, in which a PD known from the implementation of the capital guidelines is transferred to a PD (PIT)

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• Variant B

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• , in which the available historical scoring information is evaluated in combination with macroeconomic parameters

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• for the direct derivation of a PD (PIT)

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Depending on the variant selected, different components are used for the ice cream:

• Variant A:
  • Component
  “Macroeconomic factor”Variant A: Component “Transfer
  • "Macroeconomic Factor
  • Component "Transfer PD (TTC) to PD (PIT)
  ”
  • ".
• Variant B: Component “Derive
  •  Component "PD (PIT) Roll Rate of DpD".
  •  Component "PD (PIT)
  on the basis of historical scoring information and macroeconomic parameters”
  • Rating/Scoring Migration Analysis".
    
    

Variant A - Transfer PD (TTC) to PD (PIT)

This variant has to be applied if a customer decides to transfer an existing PD (TTC) to a PD (PIT) applying macroeconomic factors.

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