This paper presents a backtesting framework for a probability of default (PD) model, assuming that the latter is calibrated to both point-in-time (PIT) and through-the-cycle (TTC) levels. We claim ...

The Basel Accords require financial institutions to regularly validate their loss given default (LGD) models. This is crucial so banks are not misestimating the minimum required capital to protect ...

The premise behind backtesting is that if a specific strategy would have generated returns in the past, replicating that strategy may be able to generate returns in the future. Examples of investment ...