On a spread model for portfolio credit risk modeling

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

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 proceeding › Conference contribution › peer-review

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 language	English
Title of host publication	AIP Conference Proceedings
Pages	1-4
Number of pages	4
Publication status	Published - 2015
Event	International Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014 - Rhodes, Greece Duration: 22 Sept 2014 → 28 Sept 2014

Conference

Conference	International Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014
Country/Territory	Greece
City	Rhodes
Period	22/09/14 → 28/09/14

Keywords

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

Cite this

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title = "On a spread model for portfolio credit risk modeling",

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.",

keywords = "Mathematics, Physics, Applied, Credit Portfolio, Beta Regression, Logistic Regression, Actuarial Principle",

author = "Guerreiro, {Gracinda Rita Diogo} and Esqu{\'i}vel, {Manuel Leote} and Fernandes, {Jos{\'e} Moniz} and Silva, {Ana Filipa}",

note = "sem pdf; International Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014 ; Conference date: 22-09-2014 Through 28-09-2014",

year = "2015",

language = "English",

pages = "1--4",

booktitle = "AIP Conference Proceedings",

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TY - GEN

T1 - On a spread model for portfolio credit risk modeling

AU - Guerreiro, Gracinda Rita Diogo

AU - Esquível, Manuel Leote

AU - Fernandes, José Moniz

AU - Silva, Ana Filipa

N1 - sem pdf

PY - 2015

Y1 - 2015

N2 - 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.

AB - 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.

KW - Mathematics

KW - Physics, Applied

KW - Credit Portfolio

KW - Beta Regression

KW - Logistic Regression

KW - Actuarial Principle

M3 - Conference contribution

SP - 1

EP - 4

BT - AIP Conference Proceedings

T2 - International Conference on Numerical Analysis and Applied Mathematics 2014, ICNAAM 2014

Y2 - 22 September 2014 through 28 September 2014

ER -

On a spread model for portfolio credit risk modeling

Abstract

Conference

Keywords

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