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EOR
2007

Structural models in consumer credit

11 years 11 months ago
Structural models in consumer credit
We propose a structural credit risk model for consumer lending using option theory and the concept of the value of the consumer’s reputation. Using Brazilian empirical data and a credit bureau score as proxy for creditworthiness we compare a number of alternative models before suggesting one that leads to a simple analytical solution for the probability of default. We apply the proposed model to portfolios of consumer loans introducing a factor to account for the mean influence of systemic economic factors on individuals. This results in a hybrid structural-reduced-form model. And comparisons are made with the Basel II approach. Our conclusions partially support that approach for modelling the credit risk of portfolios of retail credit. Ó 2006 Elsevier B.V. All rights reserved.
Fabio Wendling Muniz de Andrade, Lyn C. Thomas
Added 14 Dec 2010
Updated 14 Dec 2010
Type Journal
Year 2007
Where EOR
Authors Fabio Wendling Muniz de Andrade, Lyn C. Thomas
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