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An Intensity Based Non-Parametric Default Model for Residential Mortgage Portfolios

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  • Enrico De Giorgi

    (RiskLab, ETH Zürich)

Abstract

In April 2001 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63\% of all the loan portfolios of Swiss banks. In this paper we restrict our attention to residential mortgages held by private clients, i.e. borrowers who finance their property by the loan and we model the probability distribution of the number of defaults using a non-parametric intensity based approach. We consider the time-to-default and, by conditioning on a set of predictors for the default event, we obtain a log-additive model for the conditional intensity process of the time-to-default, where the contribution of each predictor is described by a smooth function. We estimate the model by using a local scoring algorithm coming from the generalized additive model.

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File URL: http://128.118.178.162/eps/ri/papers/0209/0209001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Risk and Insurance with number 0209001.

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Date of creation: 04 Sep 2002
Date of revision: 09 Sep 2002
Handle: RePEc:wpa:wuwpri:0209001

Note: Type of Document - Acrobat PDF; prepared on IBM PC; figures: included. RiskLab report
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Web page: http://128.118.178.162

Related research

Keywords: default risk; default intensity; mortgages; generalized additive model.;

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References

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  1. 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.
  2. Yongheng Deng, . "Mortgage Termination: An Empirical Hazard Model with Stochastic Term Structure," Working Papers _002, University of California at Berkeley, Econometrics Laboratory Software Archive.
  3. repec:wop:humbsf:2000-50 is not listed on IDEAS
  4. Yongheng Deng & John M. Quigley, 2003. "Woodhead Behavior and the Pricing of Residential Mortgages," Working Paper 8616, USC Lusk Center for Real Estate.
  5. Kau, James B. & Keenan, Donald C., 1999. "Patterns of rational default," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 765-785, November.
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Cited by:
  1. Adam Głogowski, 2008. "Macroeconomic determinants of Polish banks’ loan losses – results of a panel data study," National Bank of Poland Working Papers 53, National Bank of Poland, Economic Institute.

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