On a spread model for portfolio credit risk modeling

Gracinda Rita Diogo Guerreiro, Manuel Leote Esquível, José Moniz Fernandes, Ana Filipa Silva

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Citations (Scopus)

Abstract

We propose a model for determining the spread of a credit portfolio based on the actuarial principle. In this model the spread is a function of the recovery rate and of the probability of default. In an application to data, from a consumer credit portfolio of a Cape Verde bank, we estimate the recovery rate by a beta regression and the probability of default by a logistic regression, both regressions using as independent variables sociodemographic information and consumer credit contract variables in the data set. We show that the data support the possibility of defining a spread for each client - the borrower - that is coherent with the portfolio spread given by the model.
Original languageEnglish
Title of host publicationAIP Conference Proceedings
Pages1-4
Number of pages4
Publication statusPublished - 2015
EventInternational Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014 - Rhodes, Greece
Duration: 22 Sep 201428 Sep 2014

Conference

ConferenceInternational Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014
CountryGreece
CityRhodes
Period22/09/1428/09/14

Keywords

  • Mathematics
  • Physics, Applied
  • Credit Portfolio
  • Beta Regression
  • Logistic Regression
  • Actuarial Principle

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  • Cite this

    Guerreiro, G. R. D., Esquível, M. L., Fernandes, J. M., & Silva, A. F. (2015). On a spread model for portfolio credit risk modeling. In AIP Conference Proceedings (pp. 1-4). [1648]