A Non-Performing Loans (NPLs) Portfolio Pricing Model Based on Recovery Performance: The Case of Greece

Alexandra Z. Marouli (), Eugenia N. Giannini and Yannis D. Caloghirou
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Alexandra Z. Marouli: Laboratory of Industrial and Energy Economy, National Technical University of Athens, 15780 Athens, Greece
Eugenia N. Giannini: Laboratory of Law and Technical Legislation, National Technical University of Athens, 15780 Athens, Greece
Yannis D. Caloghirou: Laboratory of Industrial and Energy Economy, National Technical University of Athens, 15780 Athens, Greece

Risks, 2023, vol. 11, issue 5, 1-17

Abstract: In this paper, a method was proposed for pricing NPL portfolios, which is currently a crucial point in the portfolio transactions between the banks and NPL servicers. The method was based on a simple mathematical model which simulated the collection process of the NPL portfolios considering the debtors’ behavioral response to various legal measures (phone calls, extrajudicial notices, court orders, and foreclosures). The model considered the recovery distribution over time and was applied successfully to the case of Greece. The model was also used to predict recovery, cost, and profit future cash flows, and to optimize the collection strategies related to the activation periods of different measures. A sensitivity analysis was also conducted to reveal the most significant factors affecting the collection process.

Keywords: debt collection; debt recovery; legal measures; NPL portfolio evaluation; debtors’ behavior modeling; recovery rate (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
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