Modelling the credit risk for portfolios of consumer loans: Analogies with corporate loan models

Modelling the credit risk for portfolios of consumer loans: Analogies with corporate loan models

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Article ID: iaor20102411
Volume: 79
Issue: 8
Start Page Number: 2525
End Page Number: 2534
Publication Date: Apr 2009
Journal: Mathematics and Computers in Simulation
Authors:
Keywords: credit risk
Abstract:

The New Basel accord has highlighted the need for models of the credit risk in portfolios of consumer loans. There are really no such models of the risks in consumer loan portfolios even though there is a well established industry – credit scoring – in modelling the risk of individual loans. Yet there are a number of models of the credit risk of portfolios of corporate loans. This paper discusses if and how one could use equivalent approaches to building such models in consumer lending even if the models themselves cannot translate across because of the assumptions underlying them.

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