PT  - JOURNAL ARTICLE
AU  - George J. Pappadopoulos
AU  - Jun Chen
TI  - Commercial Real Estate Loan Default Frequency
AID  - 10.3905/jpm.2002.319868
DP  - 2002 Oct 31
TA  - The Journal of Portfolio Management
PG  - 115--119
VI  - 29
IP  - 1
4099  - https://pm-research.com/content/29/1/115.short
4100  - https://pm-research.com/content/29/1/115.full
AB  - Capital allocation decisions become an even tougher issue without a consistent measure of credit risk across the entire portfolio. Although available risk management systems are helpful for a number of asset classes, none provides an adequate solution for real estate credit risk. With few appropriate inputs, and a notable lack of data on commercial mortgage default experience, an alternative approach to assessing real estate loan expected default frequency is needed. The authors discuss the calibration of a systematic risk metric to actual historical defaults. A comparison of the disaggregated results to those of past studies of defaults indicates that the metric appears to be a robust and useful tool for exposing opportunities and improving capital allocation decisions.