IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies

Detalhes bibliográficos
Autor(a) principal: Gubareva, Mariya
Data de Publicação: 2018
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.21/8803
Resumo: Working Paper com arbitragem científica
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spelling IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequenciesExpected credit lossIFRS 9Point-in-time probability of defaultTerm structure of probability of defaultComponents of CDS spreadsWorking Paper com arbitragem científicaThis paper presents an economically justified International Financial Reporting Standard 9 (IFRS 9) compliant solution around the impairment component related to Expected Credit Loss (ECL) modeling. Under IFRS 9 the probabilities of default (PDs) employed in ECL calculation must be real-time estimates, i.e., the PDs must be point-in-time and incorporate forward-looking information. While market indicators of future debt performance, as credit default swap (CDS) spreads and yield curves, are frequently available in the market, at least for large issuers, they cannot be used directly for PD estimates, as non-default risks, such as liquidity, transparency, and other, explain a relevant part of a fixed-income issue´s credit spread. Still, IFRS 9 requires a neutral character of PD estimations. We demonstrate how to calibrate single-name CDS implied PDs by examining the relationship between individual point-in-time forward-looking credit spreads and historically observed long-term average default frequencies. As CDS spreads are individual measures corresponding to a concrete reference entity while default frequencies represent aggregate measures across homogeneous groups of issuers, to make an economically meaningful calibration possible the CDS data must be averaged over time and rating, sector and/or geography to allow for comparison of comparable metrics. Our easy-to-implement solution specifically targeting IFRS 9 purposes is illustrated on a sample of corporate issuers. The proposed adjustment framework permits to reach better understanding by banks and financial institutions of complex ongoing interactions between the impairment and economic capital requirements in relation to credit lossesISCAL - Lisbon Accounting and Business School, Instituto Politécnico de LisboaRCIPLGubareva, Mariya2018-08-29T16:46:42Z2018-05-202018-05-20T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.21/8803engISSN 2184-3325info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-08-03T09:56:43Zoai:repositorio.ipl.pt:10400.21/8803Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T20:17:30.946453Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
title IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
spellingShingle IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
Gubareva, Mariya
Expected credit loss
IFRS 9
Point-in-time probability of default
Term structure of probability of default
Components of CDS spreads
title_short IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
title_full IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
title_fullStr IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
title_full_unstemmed IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
title_sort IFRS 9 compliant adjustment of CDS implied point-in-time PDs to through-the-cycle default frequencies
author Gubareva, Mariya
author_facet Gubareva, Mariya
author_role author
dc.contributor.none.fl_str_mv RCIPL
dc.contributor.author.fl_str_mv Gubareva, Mariya
dc.subject.por.fl_str_mv Expected credit loss
IFRS 9
Point-in-time probability of default
Term structure of probability of default
Components of CDS spreads
topic Expected credit loss
IFRS 9
Point-in-time probability of default
Term structure of probability of default
Components of CDS spreads
description Working Paper com arbitragem científica
publishDate 2018
dc.date.none.fl_str_mv 2018-08-29T16:46:42Z
2018-05-20
2018-05-20T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.21/8803
url http://hdl.handle.net/10400.21/8803
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv ISSN 2184-3325
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv ISCAL - Lisbon Accounting and Business School, Instituto Politécnico de Lisboa
publisher.none.fl_str_mv ISCAL - Lisbon Accounting and Business School, Instituto Politécnico de Lisboa
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
repository.mail.fl_str_mv
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