Acta Univ. Agric. Silvic. Mendelianae Brun. 2017, 65(2), 759-776 | DOI: 10.11118/actaun201765020759

The Probability of Default Under IFRS 9: Multi-period Estimation and Macroeconomic Forecast

Tomáš Vaněk, David Hampel
Department of Statistics and Operation Analysis, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

In this paper we propose a straightforward, flexible and intuitive computational framework for the multi-period probability of default estimation incorporating macroeconomic forecasts. The concept is based on Markov models, the estimated economic adjustment coefficient and the official economic forecasts of the Czech National Bank. The economic forecasts are taken into account in a separate step to better distinguish between idiosyncratic and systemic risk. This approach is also attractive from the interpretational point of view. The proposed framework can be used especially when calculating lifetime expected credit losses under IFRS 9.

Keywords: credit risk, economic forecast, IFRS 9, Markov chains, probability of default
Grants and funding:

This work was supported by the Internal Grant Agency of FBE MENDELU, the project PEF_DP_2016005.

Prepublished online: April 30, 2017; Published: May 1, 2017  Show citation

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Vaněk, T., & Hampel, D. (2017). The Probability of Default Under IFRS 9: Multi-period Estimation and Macroeconomic Forecast. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 65(2), 759-776. doi: 10.11118/actaun201765020759
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