An integrated multi-model credit rating system for private firms

Giovanni Butera, Robert Faff*

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

15 Citations (Scopus)

Abstract

This paper presents a integrated credit risk modelling approach for private firms which fulfil 2001 Basel Accord requirements in the case of the adoption of the foundation approach. Our model comprises: (a) a bottom-up technique to initially assess the through-the-cycle one-year Probability of Default (PD) and (b) a top-down approach to refine and calibrate this historical PD in a forward-looking credit risk assessment based on next year's economic outlook. We present findings from applying this model to a large sample of client firms of the Bank of Rome.

Original languageEnglish
Pages (from-to)311-340
Number of pages30
JournalReview of Quantitative Finance and Accounting
Volume27
Issue number3
DOIs
Publication statusPublished - Nov 2006
Externally publishedYes

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