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Generalised additive modelling of the credit risk of Korean personal bank loans

Kim, Young-Ah and Moffatt, Peter G and Peters, Simon (2022) 'Generalised additive modelling of the credit risk of Korean personal bank loans.' Journal of Credit Risk, 18 (3). pp. 77-103. ISSN 1744-6619

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We analyze consumer defaults in a sample of 64,000 customers taking personal loans from a Korean bank. Applying a Generalized Additive Modeling (GAM) framework, we show a non-linear impact of loan and borrower characteristics. In particular, the likelihood of default is high for both low income borrowers as well as high income borrowers. Our results are robust to a range of different tests, and highlight the usefulness of the GAM framework, especially the graphical presentation of non-linearities.

Item Type: Article
Uncontrolled Keywords: generalized additive models; basis splines (B-splines); credit scoring; loan defaults; signal detection theory; misclassification costs
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 03 Nov 2021 11:38
Last Modified: 19 Nov 2022 01:10

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