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A detailed analysis of fulfilling and delinquency of payments on loan

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  • Voloshyn, Ihor

Abstract

A new model for predicting the future expected cash flows from a loan is developed. It is based on a detailed analysis of the events of fulfilling, delinquency and default of each individual payment on the loan. The proposed model has significantly less uncertainty compared with the Markov chain model with the same detailing. The model is expected to have greater predictive power in comparison to the traditional models, and its usage will allow reducing the interest rate on the loan. The results of estimation of the probabilities of payments over time and the future expected cash flows from the loan with monthly equal principal repayment are given.

Suggested Citation

  • Voloshyn, Ihor, 2014. "A detailed analysis of fulfilling and delinquency of payments on loan," MPRA Paper 60373, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:60373
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    More about this item

    Keywords

    loan; payment; delinquency; default; cash flow; present value; interest rate; credit spread; credit risk; liquidity risk; Markov chain; soft collection;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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