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Estimation of default probabilities using incomplete contracts data

Santos Silva, Joao M C and Murteira, J M R (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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Abstract

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
Depositing User: Jim Jamieson
Date Deposited: 07 Aug 2012 09:47
Last Modified: 16 Dec 2014 11:20
URI: http://repository.essex.ac.uk/id/eprint/3541

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