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Nagl, Matthias ; Nagl, Maximilian ; Rösch, Daniel

Non-linearity and the distribution of market-based loss rates

Nagl, Matthias, Nagl, Maximilian und Rösch, Daniel (2024) Non-linearity and the distribution of market-based loss rates. OR Spectrum.

Veröffentlichungsdatum dieses Volltextes: 24 Sep 2024 08:05
Artikel
DOI zum Zitieren dieses Dokuments: 10.5283/epub.59239


Zusammenfassung

We synthesize the extended linear beta regression with a neural network structure to model and predict the mean and precision of market-based loss rates. We can incorporate non-linearity in mean and precision in a flexible way and resolve the problem of specifying the underlying form in advance. As a novelty, we can show that the proportion of non-linearity for the mean estimates is 14.10% and ...

We synthesize the extended linear beta regression with a neural network structure to model and predict the mean and precision of market-based loss rates. We can incorporate non-linearity in mean and precision in a flexible way and resolve the problem of specifying the underlying form in advance. As a novelty, we can show that the proportion of non-linearity for the mean estimates is 14.10% and 80.37% for the precision estimates. This implies that especially the shape of the loss rate distribution entails a large amount of non-linearity and, thus, our approach consistently outperforms its linear counterpart. Furthermore, we derive trainable activation functions to allow a data-driven estimation of their shape. This is important if predictions have to be in a certain interval, e.g., (0, 1) or (0, ∞) . Conducting a scenario analysis, we observe that our estimated distributions are more refined compared to traditional models, thereby demonstrating their suitability for risk management purposes. These estimated distributions can assist financial institutions in better identifying diverse risk profiles among their creditors and across various macroeconomic states.



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Details

DokumentenartArtikel
Titel eines Journals oder einer ZeitschriftOR Spectrum
Verlag:Springer
Datum21 September 2024
InstitutionenWirtschaftswissenschaften > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch)
Identifikationsnummer
WertTyp
10.1007/s00291-024-00787-7DOI
Stichwörter / KeywordsLoss given default · Machine learning · Explainable artificial intelligence (XAI) · Distribution
Dewey-Dezimal-Klassifikation300 Sozialwissenschaften > 330 Wirtschaft
StatusVeröffentlicht
BegutachtetJa, diese Version wurde begutachtet
An der Universität Regensburg entstandenJa
URN der UB Regensburgurn:nbn:de:bvb:355-epub-592390
Dokumenten-ID59239

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