The default probabilities of the individual loans in a portfolio are each mapped to the standard normal distribution Ui, of which values in the extreme right tail represent default.

A low value of the factor F indicates that the economy is strong, while a high value of F represents economic weakness.

For corporate borrowers, the value of the factor F is higher for loans to companies with more cyclical businesses.

The model coefficient a directly relates to the correlations between the default probability distributions U; of the loans in the portfolio.