Assessment of the probability of default

Assessment of the Probability of Default The current Bachelor's thesis analyses the probability of default for loan portfolios with no or a few defaults. The cases of dependent and independent defaults are described. The paper aims at suggesting formulas for calculating the probability of default and comparing the results in cases of dependent and independent events where there are no or a few defaults. For this purpose, formulas for calculation of such a probability have been derived. This research could be valuable in estimation of the possibility of defaults in specific credit portfolios or credit portfolios of clients of new credit institutions. At first, the paper analyses the case where there are no defaults observed; afterwards, a case where several defaults have occurred is considered along with a case of dependent events. Also, the modification of probabilities, the application of the identified probability of defaults, and the resulting problems are discussed, and the conclusions are given