Estimation of default probabilities using incomplete contracts data
AbstractThis paper develops a count data model for credit scoring which allows the estimation of default probabilities using incomplete contracts data. The main advantage of the proposed approach is that it permits a more efficient use of the data, including that for the most recent clients. Moreover, because the probability of default is specified as a function of the age of the contract, the model provides some information on the timing of the defaults. The model is based on the beta-binomial distribution, which is found to be particularly adequate for this purpose. A well-known dataset on personal loans is used to illustrate the application of the proposed model.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 16 (2009)
Issue (Month): 3 (June)
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Web page: http://www.elsevier.com/locate/jempfin
Beta-binomial distribution Credit scoring Population drift;
Other versions of this item:
- J. M. R. Murteira & Joao M. C. Santos Silva, 2000. "Estimation of Default Probabilities Using Incomplete Contracts Data," Econometric Society World Congress 2000 Contributed Papers 1121, Econometric Society.
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