Class CreditRiskModel

java.lang.Object

org.episteme.social.economics.models.CreditRiskModel

public final class CreditRiskModel
extends Object

Models credit risk and probability of default. Provides standard metrics like Altman Z-Score and Expected Loss.

Version:

1.2

Author:

Silvere Martin-Michiellot, Gemini AI (Google DeepMind)

Method Summary

Modifier and Type	Method	Description
static Real	calculateZScore(double x1, double x2, double x3, double x4, double x5)	Calculates the Altman Z-Score for bankruptcy prediction.
static Real	expectedLoss(double ead, double pd, double lgd)	Calculates Expected Loss (EL).

Methods inherited from class Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Method Details

calculateZScore

public static Real calculateZScore(double x1,
 double x2,
 double x3,
 double x4,
 double x5)

Calculates the Altman Z-Score for bankruptcy prediction.

Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5

• X1 = Working Capital / Total Assets
• X2 = Retained Earnings / Total Assets
• X3 = EBIT / Total Assets
• X4 = Market Value of Equity / Total Liabilities
• X5 = Sales / Total Assets

Parameters:

x1 - Working Capital / Total Assets

x2 - Retained Earnings / Total Assets

x3 - Earnings Before Interest and Taxes / Total Assets

x4 - Market Value of Equity / Book Value of Total Liabilities

x5 - Sales / Total Assets

Returns:

the calculated Z-Score

expectedLoss

public static Real expectedLoss(double ead,
 double pd,
 double lgd)

Calculates Expected Loss (EL). EL = EAD * PD * LGD

Parameters:

ead - Exposure at Default

pd - Probability of Default (0-1)

lgd - Loss Given Default (0-1)

Returns:

the expected loss amount