Temporal coarse-graining of an OU latent default-probability path in a binomial model generates scale-dependent effective default correlation that explains long-horizon overdispersion in corporate default counts.
The baseline default probabilityp t is inherited from the latent default-probability path of the OU–Binomial state-space model
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Temporal Coarse-Graining of Latent Default-Probability Paths Generates Effective Default Correlation
Temporal coarse-graining of an OU latent default-probability path in a binomial model generates scale-dependent effective default correlation that explains long-horizon overdispersion in corporate default counts.