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CCF Modeling for Exposure at default

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CCF Modeling for Exposure at default

Hi,

 

I am modeling for CCF to calculate EAD. Can anyone please tell me the logic if i use the transformation of the target variable (CCF) for modeling so that the value is bounded between 0 and 1. How would i arrive at the equation CCF(transformed) = - ln (1-CCF).

 

what might be the logic behind it? I am going through a book "credit risk analytics" by Bart Baesens.

 

It is mentioned Measure:CCF,

Formulae (EAD-DRAWN)/(LIMIT-DRAWN)

lower bound: - infinity

upper bound: 1

Transformation : - ln (1-CCF)

 

Can anyone tell me how would we arrive at the transformation equation mentioned above?

 

Thanks!

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