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Readjusting trade-offs among criteria in internal ratings of credit-scoring: an empirical essay of risk analysis in mortgage loans

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  • Fernando A. F. Ferreira
  • Ronald W. Spahr
  • Irina F. M. D. Gavancha
  • Amali Çipi

Abstract

Credit-scoring becomes increasingly important in poor economies and recessions. Decreasing liquidity due to reduced access to both money and debt markets has induced banks to impose restrictions on offering credit, including credit for mortgage loans. In this paper we analyze the internal rating system used by one of the top-five banks in Portugal, and propose a methodological framework which, based on an application of the Delphi technique, allows adjusting trade-offs among evaluation criteria and provides decision makers with a fairer, more accurate and transparent mortgage risk evaluation system.

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  • Fernando A. F. Ferreira & Ronald W. Spahr & Irina F. M. D. Gavancha & Amali Çipi, 2013. "Readjusting trade-offs among criteria in internal ratings of credit-scoring: an empirical essay of risk analysis in mortgage loans," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(4), pages 715-740, September.
    • Handle: RePEc:taf:jbemgt:v:14:y:2013:i:4:p:715-740
    DOI: 10.3846/16111699.2012.666999
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    References listed on IDEAS

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    1. F A F Ferreira & S P Santos & P M M Rodrigues, 2011. "Adding value to bank branch performance evaluation using cognitive maps and MCDA: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(7), pages 1320-1333, July.
    2. Crook, Jonathan N. & Edelman, David B. & Thomas, Lyn C., 2007. "Recent developments in consumer credit risk assessment," European Journal of Operational Research, Elsevier, vol. 183(3), pages 1447-1465, December.
    3. Norman Dalkey & Olaf Helmer, 1963. "An Experimental Application of the DELPHI Method to the Use of Experts," Management Science, INFORMS, vol. 9(3), pages 458-467, April.
    4. Mari, Carlo & Reno, Roberto, 2005. "Credit risk analysis of mortgage loans: An application to the Italian market," European Journal of Operational Research, Elsevier, vol. 163(1), pages 83-93, May.
    5. Doumpos, M. & Kosmidou, K. & Baourakis, G. & Zopounidis, C., 2002. "Credit risk assessment using a multicriteria hierarchical discrimination approach: A comparative analysis," European Journal of Operational Research, Elsevier, vol. 138(2), pages 392-412, April.
    6. Kosmidou K. & Doumpos M. & Zopounidis C., 2002. "A Multicriteria Hierarchical Discrimination Approach for Credit Risk Problems," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 53-68, January -.
    7. Yu, Lean & Wang, Shouyang & Lai, Kin Keung, 2009. "An intelligent-agent-based fuzzy group decision making model for financial multicriteria decision support: The case of credit scoring," European Journal of Operational Research, Elsevier, vol. 195(3), pages 942-959, June.
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    Cited by:

    1. Maria A. S. Xavier & Fernando A. F. Ferreira & José P. Esperança, 2021. "An intuition-based evaluation framework for social credit applications," Annals of Operations Research, Springer, vol. 296(1), pages 571-590, January.

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