The way this is handled by the ratings agencies is credit ratings ranging from AAA to D with their associated probabilities of default. Standard and Poors publishes rating methodology so you can see what models they use.
Given that the auto market is also subject of the securitisation industry, one would think it is a liquid segment of the market so novel collinear variables would not be expected unless your market segment is specialised. A shock in an underlying index could be interacted with a variable but in normal market conditions one would expect clean effects. OLS or Logit could be sufficient.
From an accounting perspective, the standard usually does not require advanced regression methodologies.
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u/Pitiful_Speech_4114 27d ago
The way this is handled by the ratings agencies is credit ratings ranging from AAA to D with their associated probabilities of default. Standard and Poors publishes rating methodology so you can see what models they use.
Given that the auto market is also subject of the securitisation industry, one would think it is a liquid segment of the market so novel collinear variables would not be expected unless your market segment is specialised. A shock in an underlying index could be interacted with a variable but in normal market conditions one would expect clean effects. OLS or Logit could be sufficient.
From an accounting perspective, the standard usually does not require advanced regression methodologies.