Default Estimation for Low-Default Portfolios
by Nicholas M. Kiefer
The problem in default probability estimation for low-default portfolios is that there is little relevant historical data information. No amount of data processing can fix this problem. More information is required. Incorporating expert opinion formally is an attractive option.
Any whole or partial reproduction of material in this paper should include the following citation: Nicholas M. Kiefer, "Default Estimation for Low-Default Portfolios," Office of the Comptroller of the Currency, Economics Working Paper 2006-2, September 2006.