A hybrid model to estimate corporate default probabilities in China based on zero-price probability model and long short-term memory

Jiabao Jing, Wenwen Yan and Xiaomei Deng

Applied Economics Letters, 2021, vol. 28, issue 5, 413-420

Abstract: This article proposes a hybrid model by combining zero-price probability model with long short-term memory (ZPP-LSTM) to estimate corporate default probabilities. The ZPP-LSTM model enhances the time-series data forecast by introducing LSTM in ZPP model, which can better estimate the corporate default probabilities in the industry sensitive to an uncertain environment. The full samples of Chinese listed companies in construction and real estate industries are selected to evaluate the performance of ZPP-LSTM model. The results show that our proposed model outperforms other benchmark models in terms of the default probability estimation.

Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1080/13504851.2020.1757611

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