Mixture Cure Models in Prediction of Time to Default: Comparison with Logit and Cox Models

Ewa Wycinka () and Tomasz Jurkiewicz ()
Additional contact information
Ewa Wycinka: University of Gdansk
Tomasz Jurkiewicz: University of Gdansk

A chapter in Contemporary Trends and Challenges in Finance, 2017, pp 221-231 from Springer

Abstract: Abstract Mixture cure models are an extension of the standard survival models used for predicting survivors in the case of two distinct subpopulations [Sy and Taylor (Biometrics 56: 227–236, 2000)]. The models assume that the studied population is a mixture of susceptible individuals, who may experience the event of interest, and non-susceptible individuals, who will never experience it [Corbière and Joly (Comput Methods Prog Biomed 85(2): 173–180, 2007)]. Mixture cure models were used for the first time in medical statistics to model long-term survival of cancer patients. Tong et al. (Eur J Oper Res 218(1): 132–139, 2012) introduced mixture cure models to the area of credit scoring, where a large proportion of the accounts do not experience default during the loan term. In this paper, we investigate the use of a mixture cure model for a sample of 5000 consumer credit accounts from a 60-month personal loans portfolio of a Polish financial institution. All loans have been observed for 24 months. Default is the event of interest, whereas earlier repayment is considered to be censoring. We develop and compare default prediction models using the logistic regression, Cox model and mixture cure approaches. Similarities with and differences to the study results obtained by Tong et al. (Eur J Oper Res 218(1): 132–139, 2012) are scrutinised. The final discussion focuses on the usefulness of mixture cure models in predicting the probability of default, and the limitations of these models.

Keywords: Current Mixture Model; Default; Early Repayment; Long-term Survival Model; Term Loans (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-54885-2_21

Ordering information: This item can be ordered from
http://www.springer.com/9783319548852

DOI: 10.1007/978-3-319-54885-2_21

Access Statistics for this chapter

More chapters in Springer Proceedings in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().