Modeling Bond Default Risk, 1995 Style (Musical Tribute)

Modeling Bond Default Risk, 1995 (pdf)

This practice note was prepared by a work group organized by the Committee on Life Insurance Financial Reporting of the American Academy of Actuaries.

AIG is/was an American insurance corporation. On September 28, 2008, the Federal Reserve created an $85 billion credit facility to enable the company to meet increased collateral obligations.

The static default assumptions (where default losses are level over the modeling period for a specific asset quality and grade) can consider assumptions developed from at least three experience period reviews: a 10- to 20-year historical analysis, a more recent historical review (3 to 5 years), and a short-term best estimate set of assumptions looking forward.

Here's a glimpse of what a hypothetical 100-year historical analysis might have found.