The use of the preference disaggregation analysis in the assessment of financial risks

Multicriteria decision aid (MCDA) provides several methodologies which are well adapted in the assessment of financial risks which are best studied from the sorting point of view. A well known approach in MCDA is based on preference disaggregation, which has already been used in ranking problems, but it is also applicable in sorting problems. Based on the preference disaggregation approach, this paper proposes a multicriteria methodology for the study of financial risks. The UTADIS method and two of its variants are presented, and their relative classification ability in assessing financial risks is evaluated through five real world financial applications involving the prediction of corporate failure, the assessment of credit card applications, the assessment of credit risk, portfolio selection and country risk evaluation.