Methods for Evaluating the Creditworthiness of Borrowers
2012
Irina Genriha, Irina Voronova

The Internal Rating Based Approach (IRB) of the Basel Capital Accord allows banks to use their own rating models for the estimation of probabilities of default (PD). The objective of this research is to present mathematical-statistical methods of creditworthiness evaluation usage at banks, describe technical issues of scoring model development for each of methods, and analyse their advantages and disadvantages. The most widely used models to forecast default include parametric methods such as discriminatory analysis, regression analysis and non-parametric methods such as decision trees, neural networks, expert systems, support vector machines and others. The authors are trying to classify all kinds of methods used for credit risk evaluation. This article opens all technical issues of each method and shows the difference in practical applications, but it does not attempts to evaluate which method is better. The authors have used a comparative analysis to show that in practice it is possible to use other methods excluding regression and discriminant analyses. The advantage of credit scoring models certainly will help banks meet the next wave in Latvian’s consumer loans and mitigate default risks.


Atslēgas vārdi
probability of default, parametric and non-parametric models, credit scoring, IRB approach, Basel Capital Accord
Hipersaite
https://ortus.rtu.lv/science/lv/publications/14031

Genriha, I., Voronova, I. Methods for Evaluating the Creditworthiness of Borrowers. Ekonomika un uzņēmējdarbiba. Nr.22, 2012, 42.-49.lpp. ISSN 1407-7337. e-ISSN 2255-8756.

Publikācijas valoda
English (en)
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