Economics at your fingertips  

A combined statistical framework for forecasting default rates of Greek Financial Institutions' credit portfolios

Anastasios Petropoulos, Vasilis Siakoulis, Dionysios Mylonas and Aristotelis Klamargias
Additional contact information
Anastasios Petropoulos: Bank of Greece
Vasilis Siakoulis: Bank of Greece
Dionysios Mylonas: Bank of Greece
Aristotelis Klamargias: Bank of Greece

No 243, Working Papers from Bank of Greece

Abstract: Credit risk modeling remains an important research topic both for financial institutions and the academic community due to its significant contribution to the issue of a bank’s capital adequacy. In this paper we build macro models for the default rates of Greek bank’s loan portfolios. Modeling is performed at two levels: First we use common techniques: regime switching regression, Bayesian regression averaging and linear regression; subsequently we combine the forecasts of the three statistical techniques. This results in increasing performance accuracy and minimizing model risk. Our main goal is twofold: First we attempt to investigate the determinants and the sensitivities of default rates in the Greek banking system where Non Performing Loans (NPLs) have risen sharply due to the sovereign debt crisis which led to a decrease in GDP from 2007 to 2016 of 25%. Secondly, the suggested statistical models can serve as the basis of projecting Greek portfolio dynamics under various macro scenarios. We find that dynamic forecasting combinations exhibit higher predictive accuracy than individual methods. This may provide practitioners with significant insight and policy tools for the banking supervision division in order to enhance monitoring efficiency and support informed decision making.

Keywords: Forecasting Default Rates; Forecast Combination; Stress Testing (search for similar items in EconPapers)
JEL-codes: G01 G21 C53 (search for similar items in EconPapers)
Pages: 41
Date: 2018-03
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Full Text (application/pdf)

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:

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Christina Tsochatzi ().

Page updated 2020-03-29
Handle: RePEc:bog:wpaper:243