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Estimating delinquency migration and the probability of default from aggregate data

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  • Jeffrey R. Stokes
  • Brent A. Gloy

Abstract

Defaulting on a mortgage represents the ultimate consequence of past decisions to delay payment. While many modeling approaches are available to estimate the probability of default, most if not all require account-level data. Further, past research has not attempted to estimate the probability that a current loan will transition among delinquency states prior to default. In this paper, we present an econometric approach that makes use of publicly available aggregate data for estimating the probability of delinquency and the probability of default. The results suggest the approach may have merit for monitoring bank performance as well as usefulness for banks’ risk management efforts.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 67 (2007)
Issue (Month): 1 (May)
Pages: 75-85

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Handle: RePEc:eme:afrpps:v:67:y:2007:i:1:p:75-85

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Related research

Keywords: Delinquency; Markov chain; Maximum entropy; Probability of default;

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Cited by:
  1. Jonathan B. Dressler & Jeffrey R. Stokes, 2010. "Survival analysis and mortgage termination at AgChoice ACA," Agricultural Finance Review, Emerald Group Publishing, vol. 70(1), pages 21-36, May.
  2. Bruce L. Dixon & Bruce L. Ahrendsen & Brandon R. McFadden & Diana M. Danforth & Monica Foianini & Sandra J. Hamm, 2011. "Competing risks models of Farm Service Agency seven-year direct operating loans," Agricultural Finance Review, Emerald Group Publishing, vol. 71(1), pages 5-24, May.
  3. Pederson, Glenn D. & Chu, Yu-Szu & Richardson, D. Wynn, 2011. "Community Bank Assessment of Agricultural Portfolio Risk Exposure: The Literature and the Methods in Use," Staff Papers 107483, University of Minnesota, Department of Applied Economics.

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