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SSRN Electronic Journal
Article . 2017 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2013
Data sources: EconStor
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Default Risk Calculation Based on Predictor Selection for the Southeast Asian Industry

Authors: Wolfgang Karl Härdle; Dedy Dwi Prastyo;

Default Risk Calculation Based on Predictor Selection for the Southeast Asian Industry

Abstract

Probability of default prediction is one of the important tasks of rating agencies as well as of banks and other financial companies to measure the default risk of their counterparties. Knowing predictors that significantly contribute to default prediction provides a better insight into fundamentals of credit risk analysis. Default prediction and default predictor selection are two related issues, but many existing approaches address them separately. We employed a unified procedure, a regularization approach with logit as an underlying model, which simultaneously selects the default predictors and optimizes all the parameters within the model. We employ Lasso and elastic-net penalty functions as regularization approach. The methods are applied to predict default of companies from industry sector in Southeast Asian countries. The empirical result exhibits that the proposed method has a very high accuracy prediction particularly for companies operating Indonesia, Singapore, and Thailand. The relevant default predictors over the countries reveal that credit risk analysis is sample specific. A few number of predictors result in counter intuitive sign estimates.

Country
Germany
Keywords

ddc:330, Predictor selection, 330 Wirtschaft, ddc:310, Default risk, Predictor selection, logit, Lasso, Elastic-net, Elastic-net, 310 Sammlungen allgemeiner Statistiken, C61, logit, Default risk, C13, G33, Lasso, jel: jel:C61, jel: jel:C13, jel: jel:G33

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
views
OpenAIRE UsageCountsViews provided by UsageCounts
downloads
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1
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95
55
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bronze