Forecasting and stress testing credit card default using dynamic models

Tony Bellotti and Jonathan Crook

International Journal of Forecasting, 2013, vol. 29, issue 4, 563-574

Abstract: We present discrete time survival models of borrower default for credit cards that include behavioural data about credit card holders and macroeconomic conditions across the credit card lifetime. We find that dynamic models which include these behavioural and macroeconomic variables provide statistically significant improvements in model fit, which translate into better forecasts of default at both account and portfolio levels when applied to an out-of-sample data set. By simulating extreme economic conditions, we show how these models can be used to stress test credit card portfolios.

Keywords: Survival analysis; Stress testing; Credit risk (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:29:y:2013:i:4:p:563-574

DOI: 10.1016/j.ijforecast.2013.04.003

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