Survival analysis methods for personal loan data

Survival analysis methods for personal loan data

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Article ID: iaor20031941
Country: United States
Volume: 50
Issue: 2
Start Page Number: 277
End Page Number: 289
Publication Date: Mar 2002
Journal: Operations Research
Authors: ,
Keywords: credit scoring
Abstract:

Credit scoring is one of the most successful applications of quantitative analysis in business. This paper shows how using survival-analysis tools from reliability and maintenance modeling allow one to build credit-scoring models that assess aspects of profit as well as default. This survival-analysis approach is also finding favor in credit-risk modeling of bond prices. The paper looks at three extensions of Cox's proportional hazards model applied to personal loan data. A new way of coarse-classifying of characteristics using survival-analysis methods is proposed. Also, a number of diagnostic methods to check adequacy of the model fit are tested for suitability with loan data. Finally, including time-by-characteristic interactions is proposed as a way of possible improvement of the model's predictive power.

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