Preventing Pro-cyclicality in the Bank Capital Regulation
In this thesis three different methodologies to convert Point-in-Time (PIT) probability of default (PD) to Through-the-Cycle (TTC) PD are applied on a sample of large Danish firms for the period 2005-2014. These kind of methodologies are important for preventing pro-cyclicality in the capital requirement, i.e. how much capital banks need to hold in order to cope with unexpected losses. The methods