Failure Prediction Models: Performance, Disagreements, and Internal Rating Systems

Validation of internal rating systems and PD estimates

This chapter elaborates on the validation requirements for rating systems and probabilities of default (PDs) which were introduced with the New Capital Standards (commonly called “Basel II”, cf. BCBS, 2004). We start in Section 2 with some introductory remarks on the topics and approaches that will be discussed later on. Then we have a view on the developments in banking regulation that have en...

High-consequence outcomes and internal disagreements: tell us more, please

This article is one of several in this special double-issue that reports the views of “users” of IPCC reports. I am a user in the sense that I advise the policy-making community and rely on the IPCC reports to provide me with authoritative views on the state of the science. My principal recommendation for making the IPCC more helpful to the policymaking community is to strive in the Fifth Asses...

Study on Internal Rating Based (IRB) models in Europe

Evaluating internal credit rating systems depending on bank size

Under a new Basel capital accord, bank regulators might use quantitative measures when evaluating the eligibility of internal credit rating systems for the internal ratings based approach. Based on data from Deutsche Bundesbank and using a simulation approach, we find that it is possible to identify strongly inferior rating systems out-of-time based on statistics that measure either the quality...

Rating Prediction with Informative Ensemble of Multi-Resolution Dynamic Models

The Yahoo! music rating data set in KDD Cup 2011 raises several interesting challenges: (1) The data covers a lengthy time period of more than eight years. (2) Not only are training ratings associated date and time information, so are the test ratings. (3) The items form a hierarchy consisting of four types of items: genres, artists, albums and tracks. To capture the rich temporal dynamics with...