Author: Jin-Chuan DUAN, Jie SUN, and Tao WANG
Methodological Foundation of DeepCredit iEWS
Published: Sep 2012. Journal of Econometrics 170(1), 191-209 (Theoretical Foundation of DeepCreditTM EWS)
This paper proposes a forward intensity approach for default prediction over different future periods. This bottom-up approach learns from big data with endogenous and exogenous factors to build a sophisticated multi-dimensional mapping from a firm’s current risk profile to its default dynamics, and thus produces a forward-looking point-in-time PD term structure with high granularity and precision.