Structural models in consumer credit
Muniz de Andrade, Fabio Wendling and Thomas, Lyn (2007) Structural models in consumer credit. European Journal of Operational Research, 183, (3), 1569-1581. (doi:10.1016/j.ejor.2006.07.049).
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We propose a structural credit risk model for consumer lending using option theory and the concept of the value of the consumer reputation. Using Brazilian empirical data and a credit bureau score as proxy for creditworthiness we compare a number of alternative models before suggesting one that leads to a simple analytical solution for the probability of default. We apply the proposed model to portfolios of consumer loans introducing a factor to account for the mean influence of systemic economic factors on individuals. This results in a hybrid structural-reduced-form model. And comparisons are made with the Basel II approach. Our conclusions partially support that approach for modelling the credit risk of portfolios of retail credit.
|Digital Object Identifier (DOI):||doi:10.1016/j.ejor.2006.07.049|
|Keywords:||finance, stochastic processes, credit risk, consumer lending, portfolio modelling|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||University Structure - Pre August 2011 > School of Management
|Date Deposited:||12 Jan 2007|
|Last Modified:||06 Aug 2015 02:32|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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