Through-the-Cycle EDF Credit Risk Measures

Through the Cycle EDF

A complement to Public Firm EDF Measures

Through-the-Cycle EDF measures complement public firm EDF measures, a point-in-time credit risk metric that estimates a firm’s expected likelihood of default based on information from the equity markets, company financial statements and capital structure. Public firm EDFs are well-suited for situations where the cost of defaults or credit spread changes is high, and early detection of changes in credit risk at both the single-name and portfolio level is important.

Applications of Through-the-Cycle EDF measures

Basel II / Basel III required capital
Rating model / scorecard calibration
Economic capital Regulatory compliance Loan loss reserves and loan pricing
Portfolio management subject to credit quality guidelines
Vendor or supplier pricing
The Latest Innovation in the Public EDF Franchise

Through-the-Cycle EDF measures are part of a series of recent innovations provided by Moody’s Analytics public firm EDF franchise, including Sovereign EDF credit metrics and CDS-Implied EDF credit metrics, which provide probabilities of default for sovereigns, local governments, subsidiaries of public firms, and large private companies.