Orth, Walter (2011): Multi-period credit default prediction with time-varying covariates.
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In credit default prediction models, the need to deal with time-varying covariates often arises. For instance, in the context of corporate default prediction a typical approach is to estimate a hazard model by regressing the hazard rate on time-varying covariates like balance sheet or stock market variables. If the prediction horizon covers multiple periods, this leads to the problem that the future evolution of these covariates is unknown. Consequently, some authors have proposed a framework that augments the prediction problem by covariate forecasting models. In this paper, we present simple alternatives for multi-period prediction that avoid the burden to specify and estimate a model for the covariate processes. In an application to North American public firms, we show that the proposed models deliver high out-of-sample predictive accuracy.
|Item Type:||MPRA Paper|
|Original Title:||Multi-period credit default prediction with time-varying covariates.|
|Keywords:||Credit default; multi-period predictions; hazard models; panel data; out-of-sample tests|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods
C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C41 - Duration Analysis ; Optimal Timing Strategies
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill
|Depositing User:||Walter Orth|
|Date Deposited:||22 Nov 2011 13:08|
|Last Modified:||08 Oct 2016 04:48|
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Multi-period credit default prediction with time-varying covariates. (deposited 28 Apr 2011 17:53)
Multi-period credit default prediction with time-varying covariates. (deposited 31 May 2011 13:05)
- Multi-period credit default prediction with time-varying covariates. (deposited 22 Nov 2011 13:08) [Currently Displayed]
- Multi-period credit default prediction with time-varying covariates. (deposited 31 May 2011 13:05)