• Corpus ID: 198986072

A procedure for loss-optimising default definitions across simulated credit risk scenarios

@article{Botha2019APF,
  title={A procedure for loss-optimising default definitions across simulated credit risk scenarios},
  author={Arno Botha and Conrad Beyers and Pieter de Villiers},
  journal={arXiv: Risk Management},
  year={2019}
}
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II. Alternative delinquency measures, other than simply measuring payments in arrears, can also be evaluated using this optimisation procedure. Furthermore, a simulation study is performed in testing the procedure from `first principles' across a wide range of… 

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