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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Description/Abstract
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.
| Item Type: | Article |
|---|---|
| ISSNs: | 0377-2217 (print) |
| Related URLs: | |
| 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 |
| Item ID: | 36199 |
| Date Deposited: | 12 Jan 2007 |
| Last Modified: | 02 Mar 2012 11:28 |
| Contributors: | Muniz de Andrade, Fabio Wendling (Author) Thomas, Lyn (Author) |
| Date: | 16 December 2007 |
| Status: | Published |
| Contact Email Address: | fandrade@serasa.com.br |
| URI: | http://eprints.soton.ac.uk/id/eprint/36199 |
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