Probability of default estimation in credit risk using a nonparametric approach

Rebeca Peláez Suárez (), Ricardo Cao Abad () and Juan M. Vilar Fernández ()
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Rebeca Peláez Suárez: University of A Coruña
Ricardo Cao Abad: Research Group MODES, Department of Mathematics, CITIC, University of A Coruña, ITMATI
Juan M. Vilar Fernández: Research Group MODES, Department of Mathematics, CITIC, University of A Coruña, ITMATI

TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, 2021, vol. 30, issue 2, No 5, 383-405

Abstract: Abstract In this paper, four nonparametric estimators of the probability of default in credit risk are proposed and compared. They are derived from estimators of the conditional survival function for censored data. Asymptotic expressions for the bias and the variance of these probability of default estimators are derived from similar properties for the conditional survival function estimators. A simulation study shows the performance of these four estimators. Finally, an empirical study based on modified real data illustrates their practical behaviour.

Keywords: Kernel method; Local lineal fit; Probability of default; Risk analysis; Survival analysis; 62N02; 62G05; 62G07; 62G08; 62G20; 62P20 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11749-020-00723-1

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