Macro-Economic Factors in Credit Risk Calculations: Including Time-Varying Covariates in Mixture Cure Models

Lore Dirick, Tony Bellotti, Gerda Claeskens, Bart Baesens

Research output: Journal PublicationArticlepeer-review

13 Citations (Scopus)

Abstract

The prediction of the time of default in a credit risk setting via survival analysis needs to take a high censoring rate into account. This rate is because default does not occur for the majority of debtors. Mixture cure models allow the part of the loan population that is unsusceptible to default to be modeled, distinct from time of default for the susceptible population. In this article, we extend the mixture cure model to include time-varying covariates. We illustrate the method via simulations and by incorporating macro-economic factors as predictors for an actual bank dataset.

Original languageEnglish
Pages (from-to)40-53
Number of pages14
JournalJournal of Business and Economic Statistics
Volume37
Issue number1
DOIs
Publication statusPublished - 2 Jan 2019
Externally publishedYes

Keywords

  • Credit risk modeling
  • Macro-economic factors
  • Mixture cure model
  • Survival analysis
  • Time-varying covariates

ASJC Scopus subject areas

  • Statistics and Probability
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Fingerprint

Dive into the research topics of 'Macro-Economic Factors in Credit Risk Calculations: Including Time-Varying Covariates in Mixture Cure Models'. Together they form a unique fingerprint.

Cite this