Default Model Definition

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Definition Of Default Model:

A type of model used by financial institutions to determine the likelihood of a default oncredit obligations by a corporation or sovereign entity.
These statisticalmodelsoftenuse regression analysis (analyzingchanges to certain market variables that are pertinent to a company's financial situation) to identify credit risk.In most cases, when a default model is run, the result is given as the probability of default.However, other types of default models are used to predict a company's exposure-at-default and loss-given-default.These models predominantly are used by credit rating agencies such as Moody's and Standard & Poor's (S&P).

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