Probability of default estimation in credit risk using a nonparametric approach

In this paper, four nonparametric estimators of the probability of default in credit risk are proposed and compared. They are derived from estimators of the conditional survival function for censored data. Asymptotic expressions for the bias and the variance of these probability of default estimator...

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Bibliographic Details
Published in:Test (Madrid, Spain) Spain), 2021-06, Vol.30 (2), p.383-405
Main Authors: Peláez Suárez, Rebeca, Cao Abad, Ricardo, Vilar Fernández, Juan M.
Format: Article
Language:English
Subjects:
Credit risk
Economics
Estimators
Finance
Insurance
Management
Mathematics and Statistics
Nonparametric statistics
Original Paper
Statistical Theory and Methods
Statistics
Statistics for Business
Survival
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Summary:In this paper, four nonparametric estimators of the probability of default in credit risk are proposed and compared. They are derived from estimators of the conditional survival function for censored data. Asymptotic expressions for the bias and the variance of these probability of default estimators are derived from similar properties for the conditional survival function estimators. A simulation study shows the performance of these four estimators. Finally, an empirical study based on modified real data illustrates their practical behaviour.
ISSN:1133-0686
1863-8260
DOI:10.1007/s11749-020-00723-1