Events and Meetings of Italian Statistical Society, Advances in Latent Variables - Methods, Models and Applications

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Survival models for credit risk estimation
Filomena Madormo, Fulvia Mecatti, Silvia Figini

Last modified: 2013-06-16

Abstract


Credit risk models are used to evaluate the insolvency risk caused by credits that enter into default. Many models for credit risk have been developed over the past few decades. In this paper, we focus on those models that can be formulated in terms of the probability of default by using survival analysis techniques. In order to write the default probability in terms of the conditional distribution function of the time to default, in this paper we use the Cox regression model. We compare in terms of cross validation the results of the survival model with respect to classical models employed in the literature, such as generalised linear models based on logistic regression and non parametric techniques based on classification trees. An empirical study, based on real data, illustrates the performance of each model.

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