RT Journal Article
SR Electronic
A1 Vaněk, Tomáš
T1 Economic Adjustment of Default Probabilities
JF European Journal of Business Science and Technology
YR 2016
VO 2
IS 2
SP 122
OP 130
DO 10.11118/ejobsat.v2i2.64
UL https://ejobsat.cz/artkey/ejo-201602-0003.php
AB This paper proposes a straightforward and intuitive computational mechanism for the economic adjustment of default probabilities, allowing the extension of the original (usually one-year) probability of default estimates for more than one period ahead. The intensity of economic adjustment can be flexibly modified by setting the appropriate weighting parameter. The proposed mechanism is designed to be useful especially in the context of lifetime expected credit losses calculation within the IFRS 9 requirements.