PD Model
The probability of default (PD) model provides the Point In Time (PIT) PD term structure.
The probability of default (PD) model provides the PD term structure based on multi-state Markov (MSM) transformation. Through the cycle (TTC) PD is the output of MSM transformation. The Vasicek model is used to convert TTC PD to point-in-time (PIT) PD. In the Vasicek single-factor model, PDs are estimated based on a single common factor, typically a macroeconomic variable. PD model provides PD term structure based on macroeconomic scenarios.
Business Benefit:
This feature calculates the PD term structure, which is used as input for the ECL calculation.
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