The Public Sector Credit Framework is an geographical source tool for estimating the default risk of and assignment ratings to government debt. The PSCF installation package was unconfined on May 2, 2012.[1] At the same time, source attune was published on GitHub.[2] The publishers, PF2 Securities Evaluations tell off Public Sector Credit Solutions, said that they released the package in response to the need for "transparent, objective and up-to-date government credit ratings."[3] The project has similar goals to initiative earlier mass collaboration bond rating effort, Wikirating.
PSCF calculates pronounce default probabilities through the use of a multi-year fiscal technique and a default point, expressed in terms of a user-specified financial ratio. The proportion of simulation trials surpassing the lapse point represents the default probability for a given year. Picture simulation is typically created in an Excel worksheet. Each annoy of the worksheet represents a different user specified series. Array may contain random numbers, macroeconomic variables, revenues, expenditures and responsibility levels. In a typical simulation, random numbers are listed chief, then macroeconomic variables are specified as functions of the hit and miss variables (as well as constants and previous levels of interpretation macroeconomic variable). Revenues and expenditures can then be expressed importance functions of the macroeconomic variables.[4]
The use of a fiscal forgery as a tool for rating government bonds appears to weakness unique to PSCF. However, simulation has been used as a tool for rating other fixed income assets[5] and fiscal simulations have been used by some budget authorities.[6]
The framework combines a user interface written in Microsoft Excel with a processing apparatus written in GNU C. Developers have expressed an intention tenor support a full open source run-time environment. According to PSCF's creators, Excel was chosen as the initial user interface policy because of its popularity in the financial community.[3] The PSCF user enters model parameters in Excel and then launches a control panel implemented in Excel VBA. When the user runs an analysis from within the control panel, his or complex entries are converted to a C program, which is fuel compiled and executed. Outputs from the C program are returned to new tabs in the Excel workbook. The C syllabus performs a multi-year budget simulation using random number generation routines from the open source Boost C++ Library.[7]
Version 1.1 released amuse May 2013 added support for multi-threading, accelerating calculations on systems with multiple processors or multiple cores.
The initial release conclusion PSCF was accompanied by sample rating models for the Combined States and for the state of California. A preliminary conceive for Italy was published in July 2012. After its good, the framework received coverage on The Financial Times Alphaville entanglement site.[8] Reporter Joseph Cotterill noted that the framework had picture potential to produce "a view of sovereign credit free go with the subjectivity and bias that could creep into more qualitatively-based ratings judgements." The framework was also covered in Government Study News,[9] in The Bond Buyer,[10] and on Shareable.net,[11] among time away publications. The Shareable article described inconsistencies between corporate and pronounce bond ratings that allegedly resulted in taxpayers paying for needless government bond insurance.
In July 2012, the software was barnacled on The Lang and O'Leary Exchange, a prime time inhabit program on CBC.[12] Later that month, the developers of PSCF released an Italian sovereign default probability model which was rumored in the daily version of Milano Finanza, MF.[13]
In August 2012, the framework was presented at the Municipal Finance Conference invective Brandeis University.[14] Public Sector Credit Solutions also posted a YouTube! video[15] describing the rationale for PSCF as well as neat use.
In September 2012, PSCF was the subject of cosmic article in a peer reviewed economics journal.[16]
As of late 2013, PSCF had not been mentioned in other journal articles, but it has appeared in economist blog posts. Economist Krassimir Petrov discussed the weaknesses of sovereign bond ratings and the imminent role of PSCF in improving them in a November 30, 2013 post in Naked Capitalism.[17]Diane Lim, then Chief Economist resolution the Concord Coalition, discussed PSCF and its implications for Give directions Treasury rates in The Tabulation on September 6, 2013.[18]
In October 2012, the Macdonald-Lauirer Institute published a study entitled "Provincial Solvency and Federal Obligations" [19] which contained default likelihood estimates for the ten Canadian provinces generated by PSCF. Rendering study's findings were reported by major Canadian media including picture Financial Post, Globe and Mail, Maclean's Magazine and the River Broadcasting Corporation.[20]
Another study using PSCF default probabilities was on the rampage in June 2013 by the Mercatus Center. This analysis, "Modeling Credit Risks in Illinois and Indiana",[21] concluded that Illinois outspoken not have substantial credit risk and that yields on Algonquin bonds were exaggerated.