28th EURO conference

Activity: Participating in or organising an event typesParticipation in conference

Description

Modelling Loss Given Default with measures of risk-taking and financial knowledge. Loss Given Default is one of the three credit risk components that are estimated for loan loss provisions, for regulatory and economic capital calculations following Basel II and III guidelines on banks’ capital adequacy. It is usually measured as Recovery Rate (proportion of debt recovered from defaulted borrowers). Normally the inputs to the model consist of personal and loan characteristics available from the application form, credit bureau data, account transactions. It is reasonable to suggest that borrowers’ personality is at least partially responsible for repayment performance, yet research on this topic is limited. This talk will explore a potential value of personality measures in risk assessment and LGD modeling. It will describe the preliminary results from the project based on a unique Brazilian dataset that combines traditional loan characteristics with survey data that includes measures of borrowers’ attitudes towards risk-taking and their financial knowledge. Several modelling approaches will be compared based on measures of model fit and predictive performance.
Period3 Jul 20166 Jul 2016
Event typeConference
LocationPoznan, Poland

Keywords

  • Loss Given Defualt, consumer credit, psychology