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Modelling credit risk of portfolio of consumer loans

Malik, M. and Thomas, L. (2007) Modelling credit risk of portfolio of consumer loans , Southampton, UK University of Southampton 25pp. (University of Southampton Discussion Paper Series - Centre for Operational Research, Management Sciences and Information Systems, CORMSIS-07-12).

Record type: Monograph (Discussion Paper)

Abstract

One of the issues that the Basel Accord highlighted was that though techniques for estimating the probability of default and hence the credit risk of loans to individual consumers are well established, there were no models for the credit risk of portfolios of such loans. Motivated by the reduced form models for credit risk in corporate lending, we will seek to exploit the obvious parallels between behavioural scores and the ratings ascribed to corporate bonds to build consumer lending equivalents. We incorporate both consumer specific ratings and macroeconomic factors in the framework of Cox Proportional Hazard models. Our results show that default intensities of consumers are significantly influenced by macro factors. Such models then can be used as the basis for simulation approaches to estimate the credit risk of portfolios of consumer loans.

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More information

Published date: 2007
Keywords: finance, credit risk, survival analysis, credit scoring

Identifiers

Local EPrints ID: 58377
URI: http://eprints.soton.ac.uk/id/eprint/58377
ISSN: 1356-3548
PURE UUID: f8bd0ad7-1625-405e-a0fc-258409aa08fe

Catalogue record

Date deposited: 15 Aug 2008
Last modified: 17 Jul 2017 14:27

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Contributors

Author: M. Malik
Author: L. Thomas

University divisions

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