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Estimation of default probabilities using incomplete contracts data

João Santos Silva () and J.M.R. Murteira

Journal of Empirical Finance, 2009, vol. 16, issue 3, 457-465

Abstract: This paper develops a count data model for credit scoring which allows the estimation of default probabilities using incomplete contracts data. The main advantage of the proposed approach is that it permits a more efficient use of the data, including that for the most recent clients. Moreover, because the probability of default is specified as a function of the age of the contract, the model provides some information on the timing of the defaults. The model is based on the beta-binomial distribution, which is found to be particularly adequate for this purpose. A well-known dataset on personal loans is used to illustrate the application of the proposed model.

Keywords: Beta-binomial; distribution; Credit; scoring; Population; drift (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: Estimation of Default Probabilities Using Incomplete Contracts Data (2000) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:16:y:2009:i:3:p:457-465

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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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