Is the diagram correct in calculating foward PD(conditional default) ? Or should the formula be
Probability of default = probability of survival x forward PD
Which of this is equal to marginal PD(unconditional) and which of this is equal to hazard rate?
I am trying to model probability of default using survival analysis but got confused with the definition. I want to try and compute 12month PD which is what the IFRS9 needs. After getting the PD for each month, I am not sure which PD to sum to get the 12 month PD I.e marginal or forward PD.
Probability of default = probability of survival x forward PD
Which of this is equal to marginal PD(unconditional) and which of this is equal to hazard rate?
I am trying to model probability of default using survival analysis but got confused with the definition. I want to try and compute 12month PD which is what the IFRS9 needs. After getting the PD for each month, I am not sure which PD to sum to get the 12 month PD I.e marginal or forward PD.
Attachments

1.3 MB Views: 25