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Estimation of default probabilities using incomplete contracts data

Santos Silva, JMC and Murteira, JMR (2009) 'Estimation of default probabilities using incomplete contracts data.' Journal of Empirical Finance, 16 (3). pp. 457-465. ISSN 0927-5398

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This paper develops a count data model for credit scoring which allows the estimation of default probabilities using incomplete contracts data. The main advantage of the proposed approach is that it permits a more efficient use of the data, including that for the most recent clients. Moreover, because the probability of default is specified as a function of the age of the contract, the model provides some information on the timing of the defaults. The model is based on the beta-binomial distribution, which is found to be particularly adequate for this purpose. A well-known dataset on personal loans is used to illustrate the application of the proposed model.

Item Type: Article
Uncontrolled Keywords: Beta-binomial distribution Credit scoring Population drift
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 07 Aug 2012 09:47
Last Modified: 06 Jan 2022 14:36

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