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Probability of default validation in a corporate credit rating model
Journal of the Korean Data & Information Science Society 2017;28:605-15
Published online May 31, 2017
© 2017 Korean Data & Information Science Society.

Woosik Lee1 · Dong-Yung Kim2

1Department of Information Statistics, Anyang University
2Korea Ratings Plus
Correspondence to: Woosik Lee
Adjunct faculty, Department of Information Statistics, Anyang University, Gyeonggi-do 14028, Korea. E-mail: woosiklee@hotmail.com
Received April 10, 2017; Revised May 19, 2017; Accepted May 24, 2017.
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/3.0) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract
Recently, financial supervisory authority of Korea and international credit rating agencies have been concerned about a stand-alone rating that is calculated without incorporating guaranteed support of parent companies. Guaranteed by parent companies, most foreign subsidiaries keeps good credit rate in spite of weak financial status. However, what if the parent companies stop supporting the foreign subsidiaries, they could have a probability to go bankrupt. In this paper, we have validated a credit rating model through statistical measurers such as performance, calibration, and stability for Korean companies owning foreign subsidiaries.
Keywords : Risk science, probability of default, risk management, credit rating model, parent company guarantee.


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