Estimating Recovery Curve for NPLs

Roberto Rocci, Alessandra Carleo () and Maria Sole Staffa
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Roberto Rocci: Sapienza University
Alessandra Carleo: Roma Tre University
Maria Sole Staffa: European University

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2022, pp 397-403 from Springer

Abstract: Abstract The objective of the present paper is to propose a new method to measure the recovery performance of a portfolio of non-performing loans (NPLs) in terms of recovery rate and time to liquidate. The fundamental idea is to draw a curve representing the recovery rates during time, here assumed discretized, for example, in years. In this way, the user can get simultaneously information about recovery rate and time to liquidate of the portfolio. In particular, it is discussed how to estimate such a curve in presence of right censored data, i.e. when the NPLs composing the portfolio have been observed in different periods. Uncertainty about the estimates is depicted trough confidence bands obtained by using the non-parametric Bootstrap. The effectiveness of the proposal is shown by applying the method to a real financial data set about some portfolios of Italian unsecured NPLs taken in charge by a specialized operator.

Keywords: Recovery rate; Time to liquidate; NPLs; Censored data (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-99638-3_64

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DOI: 10.1007/978-3-030-99638-3_64

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