Point-in-Time PD

Install and import#

bash

npm install fintech-algorithms

import { pointInTimePd } from "fintech-algorithms/credit-risk-and-default/probability-of-default/point-in-time-pd";

Signature#

pointInTimePd(through_the_cycle_pd_value, borrower_log_odds_shift, macro_factor_z, macro_sensitivity, alert_threshold)

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#

through_the_cycle_pd_value

0.03

borrower_log_odds_shift

0.25

macro_factor_z

0.8

macro_sensitivity

0.55

alert_threshold

0.06

Call#

pointInTimePd(through_the_cycle_pd_value, borrower_log_odds_shift, macro_factor_z, macro_sensitivity, alert_threshold)

Returns#

object with 9 fields: through_the_cycle_pd, baseline_log_odds, borrower_log_odds_shift, macro_log_odds_shift, point_in_time_pd, cycle_uplift, alert_threshold, state, …

{
  "through_the_cycle_pd": 0.03,
  "baseline_log_odds": -3.476098689835,
  "borrower_log_odds_shift": 0.25,
  "macro_log_odds_shift": 0.44,
  "point_in_time_pd": 0.058080015587,
  "cycle_uplift": 0.028080015587,
  "alert_threshold": 0.06,
  "state": "below-alert",
  "reason": "declared-log-odds-overlay-not-universal-ifrs-or-regulatory-formula"
}

Other exports#

This module also exports logisticPdModel, probitPdModel, throughTheCyclePd, mertonDistanceToDefault, campbellHilscherSzilagyiDistressProbability, 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.