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A Non-Performing Loans (NPLs) Portfolio Pricing Model Based on Recovery Performance: The Case of Greece

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  • Alexandra Z. Marouli

    (Laboratory of Industrial and Energy Economy, National Technical University of Athens, 15780 Athens, Greece)

  • Eugenia N. Giannini

    (Laboratory of Law and Technical Legislation, National Technical University of Athens, 15780 Athens, Greece)

  • Yannis D. Caloghirou

    (Laboratory of Industrial and Energy Economy, National Technical University of Athens, 15780 Athens, Greece)

Abstract

In this paper, a method was proposed for pricing NPL portfolios, which is currently a crucial point in the portfolio transactions between the banks and NPL servicers. The method was based on a simple mathematical model which simulated the collection process of the NPL portfolios considering the debtors’ behavioral response to various legal measures (phone calls, extrajudicial notices, court orders, and foreclosures). The model considered the recovery distribution over time and was applied successfully to the case of Greece. The model was also used to predict recovery, cost, and profit future cash flows, and to optimize the collection strategies related to the activation periods of different measures. A sensitivity analysis was also conducted to reveal the most significant factors affecting the collection process.

Suggested Citation

  • Alexandra Z. Marouli & Eugenia N. Giannini & Yannis D. Caloghirou, 2023. "A Non-Performing Loans (NPLs) Portfolio Pricing Model Based on Recovery Performance: The Case of Greece," Risks, MDPI, vol. 11(5), pages 1-17, May.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:5:p:96-:d:1150066
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    References listed on IDEAS

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    7. Schiereck, D. & Manz, F. & Müller, B., 2020. "The pricing of European non-performing real estate loan portfolios – Evidence on stock market evaluation of complex asset sales," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 124734, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
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