Modelling LGD for unsecured personal loans: decision tree approach
Thomas, L. C., Mues, C. and Matuszyk, A. (2010) Modelling LGD for unsecured personal loans: decision tree approach. Journal of the Operational Research Society, 61, 393-398. (doi:10.1057/jors.2009.67)
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Description/Abstract
The New Basel Accord, which was implemented in 2007, has made a significant difference to the use of modelling within financial organisations. In particular it has highlighted the importance of Loss Given Default (LGD) modelling. We propose a decision tree approach to modelling LGD for unsecured consumer loans where the uncertainty in some of the nodes is modelled using a mixture model, where the parameters are obtained using regression. A case study based on default data from the in-house collections department of a UK financial organisation is used to show how such regression can be undertaken.
| Item Type: | Article |
|---|---|
| ISSN: | 0160-5682 (print) |
| Uncontrolled Keywords: | Basel II, consumer credit, LGD |
| Subjects: | H Social Sciences > H Social Sciences (General) |
| Divisions: | University Structure - Pre August 2011 > School of Management |
| ePrint ID: | 152549 |
| Deposited On: | 14 May 2010 16:25 |
| Last Modified: | 01 Feb 2012 07:33 |
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