Modelling LGD for unsecured personal loans: decision tree approach
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Modelling LGD for unsecured personal loans: decision tree approach
Modelling LGD for unsecured personal loans: Decision tree approach Lyn C. Thomas Christophe Mues Anna Matuszyk University of Southampton Abstract The Basel New Accord which is being implemented throughout the banking world on 1 January 2007 has made a significant difference to the use of modelling within financial organisations. In particular it has highlighted the importance of Loss Given Defa...
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Loss Given Default (LGD) is the loss borne by the bank when a customer defaults on a loan. LGD for unsecured retail loans is often found difficult to model. In the frequentist (non-Bayesian) two-step approach, two separate regression models are estimated independently, which can be considered potentially problematic when trying to combine them to make predictions about LGD. The result is a poin...
متن کاملLGD for unsecured retail loans using Bayesian methods
Loss Given Default (LGD) is the loss borne by the bank when a customer defaults on a loan. LGD for unsecured retail loans is often found difficult to model. In the frequentist (nonBayesian) two-step approach, two separate regression models are estimated independently, which can be considered potentially problematic when trying to combine them to make predictions about LGD. The result is a point...
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parameters in a bank’s risk-rating system that impact facility ratings, approval levels, and the setting of loss reserves, as well as developing credit capital underlying risk and profitability calculations. LGD can be measured as either the net charge-off rate (accounting LGD), or the present value of cash losses (economic LGD), with respect to the initial book value of a defaulted obligation....
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ژورنال
عنوان ژورنال: Journal of the Operational Research Society
سال: 2010
ISSN: 0160-5682,1476-9360
DOI: 10.1057/jors.2009.67