R Graphical Manual

Browse All

Last data update: 2014.03.03

R: Accuracy Ratio estimation

ARestimate

R Documentation

Accuracy Ratio estimation

Description

Estimate AR (Accuracy Ratio) and mean portfolio PD (probability of default) based on conditional PDs and portfolio unconditional distribution.

Usage

ARestimate(pd.cond, portf.uncond, rating.type = "RATING")

Arguments

`pd.cond`	Conditional PD distribution (should be sorted from the worst to the best credit quality).
`portf.uncond`	Unconditional portfolio distribution (should be sorted from lowest credit quality to higher one).
`rating.type`	In case 'RATING', each item in the portf.uncond should contain number of companies in each rating class. In case 'SCORE', each item in the portf.uncond is an exact score.

Details

Approach to AR estimation is consistent with the algorithm proposed by D.Tasche in the paper: Estimating discriminatory power and PD curves when the number of defaults is small. Working paper, Lloyds Banking Group, 2009.
Mean portfolio PD (also known as Central Tendency of the portfolio) is estimated using unconditional portfolio distribution.

Value

`AR`	Estimated accuracy ratio
`CT`	Mean PD in the portfolio

Note

The algorithm is using conditional PDs as an input. In case one needs to estimate AR from actual default statistic (BAD/GOOD data), one can use, for example, somers2.

Author(s)

Denis Surzhko <densur@gmail.com>

References

Tasche, D. (2009) Estimating discriminatory power and PD curves when the number of defaults is small. Working paper, Lloyds Banking Group.
Tasche, D. (2013) The art of probability-of-default curve calibration. Journal of Credit Risk, 9:63-103.

Examples


pd.cond <- c(0.1, 0.05, 0.025, 0.01, 0.001)  # PD for given rating class 
portf.uncond <- c(10, 20, 30, 50, 10)  # Number of borrowers in each rating class
ARestimate(pd.cond, portf.uncond, rating.type = "RATING")

Results


R version 3.3.1 (2016-06-21) -- "Bug in Your Hair"
Copyright (C) 2016 The R Foundation for Statistical Computing
Platform: x86_64-pc-linux-gnu (64-bit)

R is free software and comes with ABSOLUTELY NO WARRANTY.
You are welcome to redistribute it under certain conditions.
Type 'license()' or 'licence()' for distribution details.

R is a collaborative project with many contributors.
Type 'contributors()' for more information and
'citation()' on how to cite R or R packages in publications.

Type 'demo()' for some demos, 'help()' for on-line help, or
'help.start()' for an HTML browser interface to help.
Type 'q()' to quit R.

> library(LDPD)
> png(filename="/home/ddbj/snapshot/RGM3/R_CC/result/LDPD/ARestimate.Rd_%03d_medium.png", width=480, height=480)
> ### Name: ARestimate
> ### Title: Accuracy Ratio estimation
> ### Aliases: ARestimate
> ### Keywords: PD calibration Accurancy Ratio Gini
> 
> ### ** Examples
> 
> 
> pd.cond <- c(0.1, 0.05, 0.025, 0.01, 0.001)  # PD for given rating class 
> portf.uncond <- c(10, 20, 30, 50, 10)  # Number of borrowers in each rating class
> ARestimate(pd.cond, portf.uncond, rating.type = "RATING")
$AR
[1] 0.4897885

$CT
[1] 0.02716667

>   
> 
> 
> 
> 
> 
> dev.off()
null device 
          1 
>