Credit Risk Models - Do They Deliver Their Promises? A Quantitative Assessment

We develop a framework to assess the statistical significance of expected default frequency as calculated by credit risk models. This framework is then used to analyze the quality of two commercially available models that have become popular among practitioners: KMV Credit Monitor and RiskCalc from Moody's. Using a unique database of expected default probability from both vendors, we study both the consistency of predictions and their timeliness. We introduce the concept of cumulative accuracy profile (CAP), which allows to see in one curve the percentage of companies whose defualts were captured by the models one year in advance. We also use the Miller's information test to see if the models add information to the S&P rating. The result of the analysis indicates that these models indeed add relevant information not accounted for by rating alone. Moreover, with respect to rating agencies, the models predict defaults more than ten months in advance on average.credit risk models, cumulative accuracy profile, risk modeling

Power Corrections and Nonlocal Operators

We discuss power corrections to infrared safe cross sections and event shapes, and identify a nonperturbative function that governs 1/Q corrections to these quantities.Comment: 4 pages, to appear in Proceedings of the Fifth International Workshop on Deep Inelastic Scattering and QC

Rapidity gaps and color evolution in QCD hard scattering

We discuss rapidity-gap events between two jets produced at high momentum transfer in $p$ $\bar{p}$ scattering, from the point of view of the soft energy flow into the interjet region. We define a gap cross section and, in perturbative QCD (pQCD), resum all the leading logarithms in the soft intermediate energy. We show that the numerical result from our cross section reproduces the shape of the D0 and CDF \cite{D0,CDF,D0fig} experimental data.Comment: Talk given at the International Euroconference on Quantum Chromodynamics (QCD '98), Montpellier, France, July 2-8, 199

Dijet Rapidity Gaps in Photoproduction from Perturbative QCD

By defining dijet rapidity gap events according to interjet energy flow, we treat the photoproduction cross section of two high transverse momentum jets with a large intermediate rapidity region as a factorizable quantity in perturbative QCD. We show that logarithms of soft gluon energy in the interjet region can be resummed to all orders in perturbation theory. The resummed cross section depends on the eigenvalues of a set of soft anomalous dimension matrices, specific to each underlying partonic process, and on the decomposition of the scattering according to the possible patterns of hard color flow. We present a detailed discussion of both. Finally, we evaluate numerically the gap cross section and gap fraction and compare the results with ZEUS data. In the limit of low gap energy, good agreement with experiment is obtained.Comment: 37 pages, Latex, 17 figure

Energy and Color Flow in Dijet Rapidity Gaps

When rapidity gaps in high-$p_T$ dijet events are identified by energy flow in the central region, they may be calculated from factorized cross sections in perturbative QCD, up to corrections that behave as inverse powers of the central region energy. Although power-suppressed corrections may be important, a perturbative calculation of dijet rapidity gaps in ${\rm p}\bar{\rm p}$ scattering successfully reproduces the overall features observed at the Tevatron. In this formulation, the average color content of the hard scattering is well-defined. We find that hard dijet rapidity gaps in quark-antiquark scattering are not due to singlet exchange alone.Comment: 9 pages, LaTeX, 2 epsi figure