Campbell-Hilscher-Szilagyi Distress Probability

Install and import#

bash

npm install fintech-algorithms

import { campbellHilscherSzilagyiDistressProbability } from "fintech-algorithms/credit-risk-and-default/probability-of-default/campbell-hilscher-szilagyi-distress-probability";

Signature#

campbellHilscherSzilagyiDistressProbability(nimtaavg, tlmta, exretavg, sigma, rsize, cashmta, market_to_book, log_price)

Worked example#

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input#

nimtaavg

-0.015

tlmta

0.62

exretavg

-0.04

sigma

0.48

rsize

-8.5

cashmta

0.08

market_to_book

1.8

log_price

2.3

Call#

campbellHilscherSzilagyiDistressProbability(nimtaavg, tlmta, exretavg, sigma, rsize, cashmta, market_to_book, log_price)

Returns#

object with 6 fields: published_intercept, score_contributions, failure_log_odds, distress_probability, state, reason

{
  "published_intercept": -9.164,
  "score_contributions": {
    "nimtaavg": 0.30396,
    "tlmta": 0.87792,
    "exretavg": 0.28516,
    "sigma": 0.67728,
    "rsize": 0.3825,
    "cashmta": -0.17056,
    "market_to_book": 0.135,
    "log_price": -0.1334
  },
  "failure_log_odds": -6.80614,
  "distress_probability": 0.00110573352,
  "state": "published-score-replication",
  "reason": "chs-table-4-twelve-month-lag-coefficients"
}

Other exports#

This module also exports logisticPdModel, probitPdModel, throughTheCyclePd, pointInTimePd, mertonDistanceToDefault, bharathShumwayNaiveDistanceToDefault, calculate. Every module additionally exports run as an alias of its primary function, and a meta object carrying its catalog id, domain, family, shape and article URL.

Diagrams#

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

In Search of Distress Risk — John Y. Campbell, Jens Hilscher, and Jan Szilagyi
Supervisory Guidance on Model Risk Management — OCC, Board of Governors of the Federal Reserve System, and FDIC
Evidence boundary