US Delinquency and Charge Offs data is sourced from the US Federal Reserve and is used to derive the asset correlation and loss given default estimates for various asset classes. The data is updated to the quarter beginning .

Loan Assets Correlations

For a given asset class, taking the time series of the observed default rate the implied asset correlation is derived as:

where represents the standard deviation in the time series of the default rate. The long run default probability (LRPD) is the simple average of the observed default rate.

The Loss Given Default distribution is derived from the delinquency and charge off trends as:

and the downturn LGD is a quantile of the observed loss distribution.

In the case of credit cards the loss is greater than 100% as the US FED measures the delinquency and charge offs as a percentage of the outstanding balance, where by convention the rates would be measured as a proportion of the limits. Multiplying by the average utilisation factor, for cards potentially approximately 30%, produces a loss estimates which is more consistent with estimates published in other sources.