Looking to the horizon

By Norbert Jobst, Dirk Tashe

Wednesday, October 03, 2012

Banks need to relate their point of time credit default probabilities to the longer horizons demanded by regulators. Norbert Jobst and Dirk Tashe describe a solution to the problem

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TAGS: Default

Comment by: Anonymous. Posted 11 years ago [2012-10-12 22:01:20]

This is an interesting article. My comment is essentially a question. My understanding of the distinction between "through the cycle" and "point in time" is not what I read here. The authors seem to use "point in time" as "take the current state of the economy as described by S and assume S does not change" and also use "through the cycle" to mean "use current value of S but then let it evolve with an agreed stochastic process". That's (mostly) backward from my understanding which is that "point in time" means "best current estimate" while "through the cycle" means "be optimistic that the current conditions will get better".

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