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Dual risk rating system: A step-wise demonstration 

In this blog, the author explains the steps to a dual risk rating system. In such a system, the probability of default (PD) is estimated separately from the loss given default (LGD). The expected loss for a given loan is then calculated as their product. Five essential steps to a dual risk rating system are: Understanding the key drivers of a dual risk system; Demonstrating the advantages of a dual risk rating approach through case studies; Implementing separate PD and LGD credit scoring solutions; Developing a PD and LGD mapping scale; and lastly Combining dual rating scores. Read more at :


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