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- Variant A: Component “Macroeconomic factor”
- Variant A: Component “Transfer PD (TTC) to PD (PIT)”
- Variant B: Component “Derive PD (PIT) on the basis of historical scoring information and macroeconomic parameters”
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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The component studies the correlation between default patterns in past periods with the relevant macroeconomic parameters available in those periods. By applying the regression method, a correlation can be set up between the derivation of the default rate for a specific period compared with the average default rate over the periods and underlying macroeconomic parameters. For each scenario, the bank needs to input a maximum of 5 macroeconomic parameters for a timeline. In addition, internal or external historical default rates (or accounting data) in past periods/years (by segment/portfolio) need to be provided.
Variant B - PD (PIT)
Component "PD (PIT) Roll Rate of DpD"
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