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Estimation of Default Probabilities Using Incomplete Contracts Data

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  • J. M. R. Murteira

    (Universidade de Coimbra)

  • Joao M. C. Santos Silva

    (Universidade Tecnica de Lisboa)

Abstract

This paper develops a count data model for credit scoring which allows the estimation of default probabilities using incomplete contracts data. The model is based on the beta-binomial distribution, which is found to be particularly adequate to describe this sort of data. A well known data set on personal loans granted by a Spanish bank is used to illustrate the application of the proposed model.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1121.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1121

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  1. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 74(1), pages 101-24, January.
  2. D. J. Hand & W. E. Henley, 1997. "Statistical Classification Methods in Consumer Credit Scoring: a Review," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 160(3), pages 523-541.
  3. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, Elsevier, vol. 33(3), pages 341-365, December.
  4. Heckman, James J & Willis, Robert J, 1977. "A Beta-logistic Model for the Analysis of Sequential Labor Force Participation by Married Women," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(1), pages 27-58, February.
  5. Guillen, Montserrat & Manuel Artis, 1994. "Count Data Models For A Credit Scoring System," Working Papers, Risk and Insurance Archive 021, Risk and Insurance Archive.
  6. Kasper Roszbach, 2004. "Bank Lending Policy, Credit Scoring, and the Survival of Loans," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 946-958, November.
  7. Carling, Kenneth & Jacobson, Tor & Roszbach, Kasper, 1998. "Duration of Consumer Loans and Bank Lending Policy: Dormancy Versus Default Risk," Working Paper Series 70, Sveriges Riksbank (Central Bank of Sweden).
  8. Wooldridge, J.M., 1989. "Some Aleternative To The Box-Cox Regression Model," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 534, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Thomas, Lyn C., 2000. "A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers," International Journal of Forecasting, Elsevier, Elsevier, vol. 16(2), pages 149-172.
  10. Jeffrey M. Wooldridge, 1999. "Asymptotic Properties of Weighted M-Estimators for Variable Probability Samples," Econometrica, Econometric Society, Econometric Society, vol. 67(6), pages 1385-1406, November.
  11. Carling, Kenneth & Jacobson, Tor & Roszbach, Kasper, 2001. "Dormancy risk and expected profits of consumer loans," Journal of Banking & Finance, Elsevier, Elsevier, vol. 25(4), pages 717-739, April.
  12. Johansson, Per & Palme, Marten, 1996. "Do economic incentives affect work absence? Empirical evidence using Swedish micro data," Journal of Public Economics, Elsevier, Elsevier, vol. 59(2), pages 195-218, February.
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Cited by:
  1. José Varejão & Pedro Portugal, 2003. "Why do Firms Use Fixed-Term Contracts?," Working Papers, Banco de Portugal, Economics and Research Department w200308, Banco de Portugal, Economics and Research Department.
  2. Harald Oberhofer & Michael Pfaffermayr, 2014. "Two-Part Models for Fractional Responses Defined as Ratios of Integers," WIFO Working Papers, WIFO 472, WIFO.
  3. Enrico De Giorgi, 2002. "An Intensity Based Non-Parametric Default Model for Residential Mortgage Portfolios," Risk and Insurance, EconWPA 0209001, EconWPA, revised 09 Sep 2002.
  4. J.M.C. Santos Silva & Silvana Tenreyro & Kehai Wei, 2012. "Estimating the Extensive Margin of Trade," Economics Discussion Papers, University of Essex, Department of Economics 721, University of Essex, Department of Economics.
  5. Marshall, Andrew & Tang, Leilei & Milne, Alistair, 2010. "Variable reduction, sample selection bias and bank retail credit scoring," Journal of Empirical Finance, Elsevier, Elsevier, vol. 17(3), pages 501-512, June.

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