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, pp. 393-398. (doi:10.1057/jors.2009.67).


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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
Digital Object Identifier (DOI): doi:10.1057/jors.2009.67
ISSNs: 0160-5682 (print)
Keywords: Basel II, consumer credit, LGD
ePrint ID: 152549
Date :
Date Event
January 2010Published
Date Deposited: 14 May 2010 15:25
Last Modified: 18 Apr 2017 04:18
Further Information:Google Scholar

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