RiskFlow Engine v1.0
数桥风险引擎 v1.0
Data Bridge ConsultingCredit Risk — Downgrade Risk Forecasting
This demo shows how RiskFlow uses firm fundamentals and market conditions to produce forward-looking downgrade risk estimates. By analysing patterns that typically precede rating deterioration—such as weakening profitability, rising leverage, or stressed market signals—the engine provides an early indication of which firms may face credit pressure in the coming months.
What this demo does
- Goal: identify firms at risk of a future credit rating downgrade, supporting early portfolio adjustments and credit monitoring.
- Data: monthly firm-level financials and market indicators, structured to mirror WRDS/Moody’s-style panel datasets.
- Approach: RiskFlow learns how deteriorating fundamentals, leverage build-up, liquidity tightening, and market stress relate to future credit pressure.
- Signal: early warning patterns often appear several months before a downgrade—for example, distance-to-default falling or leverage rising.
- Use cases: credit portfolio oversight, exposure management, issuer surveillance, and scenario-driven stress testing.
Dataset overview
The data used in this demo are from the WRDS database and form part of an ongoing academic research. The predictors include key firm-level financial ratios such as formulated distance-to-default measure, and macroeconomic variables. To capture real-world changes in conditions, the features are constructed in both level and trend form and processed using standard techniques such as winsorization and standardization. For confidentiality and demonstration purposes, the dataset shown here is anonymised and partially synthetic, ensuring that no real issuer can be identified while preserving the structure and behaviour of typical credit deterioration patterns.
Variables
| Name | Type | Description |
|---|---|---|
Distance-to-default
|
continuous | Formulated structural distance-to-default measure; lower values indicate higher downgrade or default risk. |
ROA
|
continuous | Return on assets; a profitability measure that often weakens before downgrades. |
Liquidity ratio
|
continuous | Current assets divided by current liabilities; falling values indicate tightening short-term liquidity. |
Firm size
|
continuous | Log of total assets or market capitalisation; captures scale and funding access. |
Book-to-market (BM)
|
continuous | Valuation indicator comparing book value to market value. |
S&P 500 return
|
continuous | Broad equity-market return proxy capturing risk-on / risk-off conditions. |
Interest rate
|
continuous | Short-term risk-free interest rate; rising rates increase refinancing pressure for leveraged firms. |
VIX index
|
continuous | Market volatility index; higher values signal stressed market conditions. |
target
|
binary | 0 = No downgrade, 1 = Downgraded |
Key definitions
| Term | Description |
|---|---|
Downgrade event
|
Month in which the issuer’s credit rating (based on Moody’s Rating data) is downgraded. The target equals 1 in that month and 0 otherwise. |
Start time / End time
|
First and last observed month for each firm in the panel. Observations outside this window are zeroed for modelling. |
Prediction horizon
|
Forward-looking horizon in months. For example, 0 = current month, 3 = three-month-ahead downgrade risk. |
Download demo data
Download ZIPWhat you’ll see
- Significance tables across different prediction horizons, showing which factors matter most and when.
- Coefficient–horizon charts that show how distance-to-default, leverage, liquidity and other drivers change in importance over time.
- A portfolio view that groups firms by model-implied downgrade risk and compares how high-risk vs low-risk portfolios perform afterwards.