How can probability of default be used?
Before I explain probability of default, I would like to overview credit risk management because probability of default is a part of process about credit risk management for financial institions. Credit risk management can be explained by two major concepts, risk management for indivisual customers and portfolio management. Both are closely connected to each others. I hope you can obtain big picture of credit risk management as a whole.
HOW CAN PROBABILITY OF DEFAULT be obtained?
I used to be in charge of credit risk management in the Japanese consumer finance company. I monitored the loan portfolio, which was 1.5 trillion JPY (about 15 billion USD). Based on this experience, I would like to explain how we can calculate probability of defaults in practice. Probability of defaults is one of the most important metrics in credit risk management. Coming soon !