mikey10011
New Member
I'm now reading the BIS paper "Studies on the Validation of Internal Rating Systems"
http://www.bis.org/publ/bcbs_wp14.htm
http://www.bis.org/publ/bcbs_wp14.pdf?noframes=1
that adds "unstressed PD" and "stressed PD" to the point-in-time (PPT) and through-the-cycle (TTC) rating systems.
I am having trouble *visualizing* Table 1 Correlation of Pooled PDs with the Business Cycle on Acrobat p. 25. For example from Figure 3 [green line p. 23] shouldn’t Quadrant 3 for Stressed PD/PPT be stable? And from Figure 4 [blue line p. 24] shouldn’t Quadrant 2 for Unstressed PD/TTC be stable? [Table 1 has Quadrants 1 &4;as stable.]
Maybe my misunderstanding is due to the following: what exactly is changing on p. 25? For example, is it the *number* of obligors or the “average value” [of what?] in a ratings bin?
Also when does the implementation of A-IRB (including validation of the internal ratings systems) begin for US banks? Is it January 2009 with a 3 years transition period?
http://www.bis.org/publ/bcbs_wp14.htm
http://www.bis.org/publ/bcbs_wp14.pdf?noframes=1
that adds "unstressed PD" and "stressed PD" to the point-in-time (PPT) and through-the-cycle (TTC) rating systems.
I am having trouble *visualizing* Table 1 Correlation of Pooled PDs with the Business Cycle on Acrobat p. 25. For example from Figure 3 [green line p. 23] shouldn’t Quadrant 3 for Stressed PD/PPT be stable? And from Figure 4 [blue line p. 24] shouldn’t Quadrant 2 for Unstressed PD/TTC be stable? [Table 1 has Quadrants 1 &4;as stable.]
Maybe my misunderstanding is due to the following: what exactly is changing on p. 25? For example, is it the *number* of obligors or the “average value” [of what?] in a ratings bin?
Also when does the implementation of A-IRB (including validation of the internal ratings systems) begin for US banks? Is it January 2009 with a 3 years transition period?
