IDEAS home Printed from https://ideas.repec.org/p/vnm/wpaper/177.html
   My bibliography  Save this paper

An MCDA-based Approach for Creditworthiness Assessment

Author

Listed:
  • Marco Corazza

    (Department of Applied Mathematics, University of Venice)

  • Stefania Funari

    (Department of Applied Mathematics, University of Venice)

  • Federico Siviero

    (Cohen & Company, Subsidiary of London)

Abstract

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.

Suggested Citation

  • Marco Corazza & Stefania Funari & Federico Siviero, 2008. "An MCDA-based Approach for Creditworthiness Assessment," Working Papers 177, Department of Applied Mathematics, Università Ca' Foscari Venezia.
    • Handle: RePEc:vnm:wpaper:177
    as

    Download full text from publisher

    File URL: http://virgo.unive.it/wpideas/storage/2008wp177.pdf
    File Function: First version, 2008
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Yorgos Goletsis & John Psarras & Jesus-Emmanuel Samouilidis, 2003. "Project Ranking in the Armenian Energy Sector Using a Multicriteria Method for Groups," Annals of Operations Research, Springer, vol. 120(1), pages 135-157, April.
    3. 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.
    4. 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.
    5. JosÉ Figueira & Salvatore Greco & Matthias Ehrogott, 2005. "Multiple Criteria Decision Analysis: State of the Art Surveys," International Series in Operations Research and Management Science, Springer, number 978-0-387-23081-8, April.
    6. Edward Altman & Gabriele Sabato, 2005. "Effects of the New Basel Capital Accord on Bank Capital Requirements for SMEs," Journal of Financial Services Research, Springer;Western Finance Association, vol. 28(1), pages 15-42, October.
    7. Zopounidis, C., 1999. "Multicriteria decision aid in financial management," European Journal of Operational Research, Elsevier, vol. 119(2), pages 404-415, December.
    8. Kosmidou K. & Doumpos M. & Zopounidis C., 2002. "A Multicriteria Hierarchical Discrimination Approach for Credit Risk Problems," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 53-68, January -.
    9. Michael Doumpos & Fotios Pasiouras, 2005. "Developing and Testing Models for Replicating Credit Ratings: A Multicriteria Approach," Computational Economics, Springer;Society for Computational Economics, vol. 25(4), pages 327-341, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Corazza & Stefania Funari & Riccardo Gusso, 2012. "An evolutionary approach to preference disaggregation in a MURAME-based credit scoring problem," Working Papers 5, Department of Management, Università Ca' Foscari Venezia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Corazza, Marco & Funari, Stefania & Gusso, Riccardo, 2016. "Creditworthiness evaluation of Italian SMEs at the beginning of the 2007–2008 crisis: An MCDA approach," The North American Journal of Economics and Finance, Elsevier, vol. 38(C), pages 1-26.
    2. Marco Corazza & Giovanni Fasano & Stefania Funari & Riccardo Gusso, 2017. "PSO-based tuning of MURAME parameters for creditworthiness evaluation of Italian SMEs," Working Papers 04, Department of Management, Università Ca' Foscari Venezia.
    3. Marco Corazza & Giovanni Fasano & Stefania Funari & Riccardo Gusso, 2021. "MURAME parameter setting for creditworthiness evaluation: data-driven optimization," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(1), pages 295-339, June.
    4. Angilella, Silvia & Mazzù, Sebastiano, 2015. "The financing of innovative SMEs: A multicriteria credit rating model," European Journal of Operational Research, Elsevier, vol. 244(2), pages 540-554.
    5. Govindan, Kannan & Jepsen, Martin Brandt, 2016. "ELECTRE: A comprehensive literature review on methodologies and applications," European Journal of Operational Research, Elsevier, vol. 250(1), pages 1-29.
    6. Tsionas, Mike G., 2019. "Multi-objective optimization using statistical models," European Journal of Operational Research, Elsevier, vol. 276(1), pages 364-378.
    7. Huck, Nicolas, 2009. "Pairs selection and outranking: An application to the S&P 100 index," European Journal of Operational Research, Elsevier, vol. 196(2), pages 819-825, July.
    8. Fernando A. F. Ferreira & Ieva Meidutė-Kavaliauskienė & Edmundas K. Zavadskas & Marjan S. Jalali & Sandra M. J. Catarino, 2019. "A Judgment-Based Risk Assessment Framework for Consumer Loans," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 7-33, January.
    9. Hatami-Marbini, Adel & Tavana, Madjid, 2011. "An extension of the Electre I method for group decision-making under a fuzzy environment," Omega, Elsevier, vol. 39(4), pages 373-386, August.
    10. Silvia Angilella & Maria Rosaria Pappalardo, 2021. "Assessment of a failure prediction model in the energy sector: a multicriteria discrimination approach with Promethee based classification," Papers 2102.07656, arXiv.org.
    11. Ioannis Tsolas, 2015. "Firm credit risk evaluation: a series two-stage DEA modeling framework," Annals of Operations Research, Springer, vol. 233(1), pages 483-500, October.
    12. Tangian, Andranik, 2008. "Predicting DAX trends from Dow Jones data by methods of the mathematical theory of democracy," European Journal of Operational Research, Elsevier, vol. 185(3), pages 1632-1662, March.
    13. Michael Doumpos & Fotios Pasiouras, 2005. "Developing and Testing Models for Replicating Credit Ratings: A Multicriteria Approach," Computational Economics, Springer;Society for Computational Economics, vol. 25(4), pages 327-341, June.
    14. Bouyssou, Denis & Marchant, Thierry, 2007. "An axiomatic approach to noncompensatory sorting methods in MCDM, II: More than two categories," European Journal of Operational Research, Elsevier, vol. 178(1), pages 246-276, April.
    15. Angeliki Papana & Anastasia Spyridou, 2020. "Bankruptcy Prediction: The Case of the Greek Market," Forecasting, MDPI, vol. 2(4), pages 1-21, December.
    16. Evangelos C. Charalambakis, 2015. "On the Prediction of Corporate Financial Distress in the Light of the Financial Crisis: Empirical Evidence from Greek Listed Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 22(3), pages 407-428, November.
    17. Fernandez, Eduardo & Navarro, Jorge & Bernal, Sergio, 2009. "Multicriteria sorting using a valued indifference relation under a preference disaggregation paradigm," European Journal of Operational Research, Elsevier, vol. 198(2), pages 602-609, October.
    18. Silvia Angilella & Sebastiano Mazz`u, 2013. "The Financing of Innovative SMEs: a multicriteria credit rating model," Papers 1308.0889, arXiv.org, revised Jun 2014.
    19. Wang, Jing & Wang, Kai & Li, Xiang & Zhao, Ruiqing, 2022. "Suppliers’ trade credit strategies with transparent credit ratings: Null, exclusive, and nonchalant provision," European Journal of Operational Research, Elsevier, vol. 297(1), pages 153-163.
    20. Perko, Igor, 2017. "Behaviour-based short-term invoice probability of default evaluation," European Journal of Operational Research, Elsevier, vol. 257(3), pages 1045-1054.

    More about this item

    Keywords

    Multi-Criteria Decision Analysis (or MCDA); MUlti-criteria RAnking MEthod (or MURAME); credit risk assessment;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vnm:wpaper:177. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daria Arkhipova (email available below). General contact details of provider: https://edirc.repec.org/data/dmvenit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.