From default rates to default matrices: an application to Brazilian consumer credit
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چکیده
Default rate is a term frequently used in financial or economic circles to designate the percentage of borrowers of a given universe (for example, a specific bank portfolio) that have not or will not comply with their credit obligations. Based on past default data, expectations of future delinquency is one of the components that usually explains the level of bank spreads (see BCB, 1999). Also, the monitoring of default rate time series makes it possible to draw relationships with economic cycles (e.g., Bangia et al, 2002) and may assist in constructing anti-cyclical regulations dealing with bank provision or capital (e.g., Jiménez & Saurina, 2006). However, despite the varied utilities of default rates, one may have different concepts of default in mind. Consequently, measurement of default rates (and its implications) may vary sharply depending on the definition employed.
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