An MCDA-based Approach for Creditworthiness Assessment
In this paper we propose a deterministic methodology for creditworthiness evaluation based on the Multi-Criteria Decision Analysis (MCDA) method known as MUlticriteria RAnking MEthod (MURAME). This approach allows to rank the firms according to their credit risk characteristics and to sort them into a prefixed number of homogeneous creditworthiness groups. Moreover, the methodology allows to estimate ex-post proxies of the probabilities of default and of the probabilities of transition. Then, we apply the proposed approach to check its capability to evaluate the creditworthiness in real cases; in particular, we consider the case of an important north eastern Italian bank.
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- Zopounidis, Constantin & Doumpos, Michael, 2002. "Multicriteria classification and sorting methods: A literature review," European Journal of Operational Research, Elsevier, vol. 138(2), pages 229-246, April.
- Rogers, Martin & Bruen, Michael, 1998. "Choosing realistic values of indifference, preference and veto thresholds for use with environmental criteria within ELECTRE," European Journal of Operational Research, Elsevier, vol. 107(3), pages 542-551, June.
- 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.
- Michael Doumpos & Fotios Pasiouras, 2005. "Developing and Testing Models for Replicating Credit Ratings: A Multicriteria Approach," Computational Economics, Society for Computational Economics, vol. 25(4), pages 327-341, June.
- Zopounidis, C., 1999. "Multicriteria decision aid in financial management," European Journal of Operational Research, Elsevier, vol. 119(2), pages 404-415, December.
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