San Jose State to develop municipal default probability model

By Tali David

Minneapolis, Dec. 6 - The California State Treasurer's Office commissioned a San Jose State University economist and a government-bond research group, Public Sector Credit Solutions, to develop a default probability model for city bonds, according to a press release.

"The new model will provide the state an approach to identify troubled cities, and increase the amount of information available to investors and the public," state treasurer Bill Lockyer said in the release.

The San Jose State economist leading the study, Matthew Holian, specializes in Urban Policy analysis and has previously applied econometric techniques to transportation, emergency services and other municipal policy issues.

The model, which is scheduled for publication in May 2013, will be fully transparent, so that anyone can use it free of charge, the release said. The model will be available via a web page and in an Excel workbook.

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