Expected Loss=Predicted Defaulted Balance* LGDPredicted Defaulted Balances are calculated by multiplications of monthly dynamic transition matricesMost granular modeling: PD modeling addresses the 12-month performance while dynamic transition modeling tracks the monthly performanceRegression: Multinomial Logistic Regression
Hypothetical Dynamic Transition Matrix based on delinquency statusCurrent (0-29DPD)Delinquent (30-89DPD)Severely Delinquent (90+)DefaultPaid
Continually multiplying the mi ...


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