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Macro-economic factors in credit risk calculations: including time-varying covariates in mixture cure models

Macro-economic factors in credit risk calculations: including time-varying covariates in mixture cure models
Macro-economic factors in credit risk calculations: including time-varying covariates in mixture cure models
The prediction of the time of default in a credit risk setting via survival analysis needs to take a high censoring rate into account. This rate is because default does not occur for the majority of debtors. Mixture cure models allow the part of the loan population that is unsusceptible to default to be modeled, distinct from time of default for the susceptible population. In this article, we extend the mixture cure model to include time-varying covariates. We illustrate the method via simulations and by incorporating macro-economic factors as predictors for an actual bank dataset.
0735-0015
1-14
Dirick, Lore
4c1e2d8f-84ac-4dde-90c7-de28f66666be
Bellotti, Tony
6cde6497-8084-46b0-8edc-a5d6904ded49
Claeskens, Gerda
81df6aa1-7480-456b-b298-82e9c29dde4a
Baesens, Bart
f7c6496b-aa7f-4026-8616-ca61d9e216f0
Dirick, Lore
4c1e2d8f-84ac-4dde-90c7-de28f66666be
Bellotti, Tony
6cde6497-8084-46b0-8edc-a5d6904ded49
Claeskens, Gerda
81df6aa1-7480-456b-b298-82e9c29dde4a
Baesens, Bart
f7c6496b-aa7f-4026-8616-ca61d9e216f0

Dirick, Lore, Bellotti, Tony, Claeskens, Gerda and Baesens, Bart (2017) Macro-economic factors in credit risk calculations: including time-varying covariates in mixture cure models. Journal of Business and Economic Statistics, 1-14. (doi:10.1080/07350015.2016.1260471).

Record type: Article

Abstract

The prediction of the time of default in a credit risk setting via survival analysis needs to take a high censoring rate into account. This rate is because default does not occur for the majority of debtors. Mixture cure models allow the part of the loan population that is unsusceptible to default to be modeled, distinct from time of default for the susceptible population. In this article, we extend the mixture cure model to include time-varying covariates. We illustrate the method via simulations and by incorporating macro-economic factors as predictors for an actual bank dataset.

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Macro Economic Factors in Credit Risk Calculations Including Time Varying Covariates in Mixture Cure Models - Accepted Manuscript
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More information

Accepted/In Press date: 1 November 2016
e-pub ahead of print date: 27 April 2017

Identifiers

Local EPrints ID: 425621
URI: http://eprints.soton.ac.uk/id/eprint/425621
ISSN: 0735-0015
PURE UUID: 1f7c8c34-cdc4-4bb7-8f28-dd8600c17ac5
ORCID for Bart Baesens: ORCID iD orcid.org/0000-0002-5831-5668

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Date deposited: 26 Oct 2018 16:30
Last modified: 28 Apr 2022 01:53

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Contributors

Author: Lore Dirick
Author: Tony Bellotti
Author: Gerda Claeskens
Author: Bart Baesens ORCID iD

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