Assessing the Accuracy of Default Risk Models:the Filter Test
Date Issued
2009
Date
2009
Author(s)
Liao, Feng-Yu
Abstract
Before any investment and loan making, estimating the default risk of a firm is the first step to assessing the potential losses and credit exposure. For that purpose, evaluating the accuracy of default risk models is critical. Such tests usually use a single and specific cutting score, which separates defaulters from non-defaulters, to evaluate the performance of the models. In contrast, this thesis proposes a new test, called the filter test. It uses four financial ratios as the filters to evaluate the accuracy of default risk models. Other reasonable indicators or benchmark values can also be added or replace those in the filter test. Hence, the filter test presents a more general, flexible and objective methodology for evaluating the accuracy of default risk models.
Subjects
default risk model
default probability
the Merton model
Altman’s Z-score
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-98-R96922028-1.pdf
Size
23.32 KB
Format
Adobe PDF
Checksum
(MD5):4deba4675601a6c3d5dcde63623d404c