Time varying and dynamic models for default risk in consumer loans

Jonathan Crook, Tony Bellotti

Research output: Journal PublicationArticlepeer-review

46 Citations (Scopus)


We review the incorporation of time varying variables into models of the risk of consumer default. Lenders typically have data which are of a panel format. This allows the inclusion of time varying covariates in models of account level default by including them in survival models, panel models or 'correction factor' models. The choice depends on the aim of the model and the assumptions that can be plausibly made. At the level of the portfolio, Merton-type models have incorporated macroeconomic and latent variables in mixed (factor) models and Kalman filter models whereas reduced form approaches include Markov chains and stochastic intensity models. The latter models have mainly been applied to corporate defaults and considerable scope remains for application to consumer loans.

Original languageEnglish
Pages (from-to)283-305
Number of pages23
JournalJournal of the Royal Statistical Society. Series A: Statistics in Society
Issue number2
Publication statusPublished - Apr 2010
Externally publishedYes


  • Factor models
  • Kalman filter
  • Logistic regression
  • Panel data
  • Reduced form models
  • Survival modelling
  • Time varying covariates

ASJC Scopus subject areas

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


Dive into the research topics of 'Time varying and dynamic models for default risk in consumer loans'. Together they form a unique fingerprint.

Cite this