Estimation of default parameters

A key requirement in credit risk management is the calculation of the individual default parameters. One prerequisite for parameter estimation is the setup of a detailed loss database.

Reliable and simple solution

With FlexFinance Rating, FERNBACH offers a flexible rating and scoring solution. The application comprises freely definable rating templates for various asset classes e.g. companies or private customers.

With FlexFinance PD Estimation, FERNBACH provides a comprehensive toolkit for the calibration of rating models and for the determination of the probability of default. FlexFinance PD Estimation provides different methods for the determination of the probability of default.

FlexFinance LGD Estimation calculates the loss given default (LGD) for loans and customers. The application is based on a loss database which is used to derive both the default events and the (net) losses that have occurred. FlexFinance LGD Estimation provides different methods for the determination of the LGD which take the actual loss, the interest loss and the settlement costs into account.

FlexFinance CCF Estimation determines the credit conversion factor (CCF) for credit lines. This is based on the potential drawing on a credit line if the counterparty defaults. A customer-specific data set of historical default and drawing rates for credit lines at individual deal level is required as input values for the application. On this basis, FlexFinance calculates the realised credit conversion factors (realised CCFs) which are the basis for further CCF estimation.