Credit Risk Theoretical Model on the Base of DCC-GARCH in Time-Varying Parameters Framework

Mathematics

Aleksander Sorokin¹  Nikita Moiseev¹  Natalya Zvezdina²  Alexey Mikhaylov³  Lyubov Khomyakova⁴  Mir Sayed Shah Danish⁵ 

[1] Department of Mathematical Methods in Economics, Plekhanov Russian University of Economics, 117997 Moscow, Russia;Department of Statistics and Data Analysis, Faculty of Economic Sciences, National Research University Higher School of Economics, 101000 Moscow, Russia;Financial Research Institute of Ministry of Finance of the Russian Federation, 127006 Moscow, Russia;Institute for Research of International Economic Relations, Financial University under the Government of Russian Federation, 124167 Moscow, Russia;Strategic Research Projects Center, University of the Ryukyus, Nishihara, Okinawa 903-0213, Japan;

关键词: default probability;    scoring model;    logistic regression;    time-varying parameters;    time series forecasting;    ARIMA;   

DOI  :  10.3390/math9192423

来源: DOAJ

【 摘 要 】

The research paper is devoted to developing a mathematical approach for dealing with time-varying parameters in rolling window logit models for credit risk assessment. Forecasting coefficients yields a better model accuracy than a trivial approach of using computed past statistics parameters for the next time period. In this paper, a new method of dealing with time-varying parameters of scoring models is proposed, which is aimed at computing the default probability of a borrower. It was empirically shown that in a continuously changing economic environment factors’ influence on a target variable is also changing. Therefore, forecasting coefficients yields a better financial result than simply applying parameters obtained by accumulated statistics over past time periods. The paper develops a new theoretical approach, incorporating a combination of the ARIMA class model, the DCC-GARCH model and the state–space model, which is more accurate, than using only the ARIMA model. Rigorous simulation testing is provided to confirm the efficiency of the proposed method.

【 授权许可】

Unknown