In this paper, we propose Vasicek-type models for estimating portfolio-level probability of default (PD). With these Vasicek models, asset correlation and long-run PD (LRPD) for a risk-homogeneous ...

Basel II requires that banks use downturn loss given default (LGD) estimates in regulatory capital calculations, citing the fact that the probability of default (PD) and LGD correlations are not ...