On the Convergence of Credit Risk in Current Consumer Automobile Loans

  title={On the Convergence of Credit Risk in Current Consumer Automobile Loans},
  author={Jackson P Lautier and Vladimir Pozdnyakov and Jun Yan},
  journal={SSRN Electronic Journal},
Risk-based pricing of loans is well-accepted. Left unstudied, however, is the conditional credit risk of a loan that remains current. Using large-sample statistics and asset-level consumer automobile asset-backed security data, we find that default risk conditional on survival converges for borrowers in disparate credit risk bands well before scheduled termination, a phenomenon we call credit risk convergence. We then use actuarial techniques to derive the conditional market-implied credit… 



Risk-based pricing of interest rates for consumer loans

Contract Pricing in Consumer Credit Markets

We analyze subprime consumer lending and the role played by down payment requirements in screening high-risk borrowers and limiting defaults. To do this, we develop an empirical model of the demand

The Real Costs of Credit Access: Evidence from the Payday Lending Market*

Using geographic differences in the availability of payday loans, I estimate the real effects of credit access among low-income households. Payday loans are small, high interest rate loans that

Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data

This paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply. The data consist of a panel of thousands of individual credit card accounts

Subprime Consumer Credit Demand: Evidence from a Lender's Pricing Experiment

We test the interest rate sensitivity of subprime credit card borrowers using a unique panel data set from a UK credit card company. What is novel about our contribution is that we were given details

Risk-Based Pricing In Consumer Lending Fall

Over the past 25 years Dr. Staten has designed and conducted research projects on a wide range of policy-oriented issues involving consumer and mortgage credit markets, He has published extensively

Are High-Interest Loans Predatory? Theory and Evidence from Payday Lending

It is often argued that people might take on too much high-cost debt because they are present focused and/or overoptimistic about how soon they will repay. We measure borrowers' present focus and

Systematic Mistakes in the Mortgage Market and Lack of Financial Sophistication

Institutions often offer a menu of contracts to consumers in an attempt to create a separating equilibrium that reveals borrower types and provides better pricing. We test the effectiveness of a

Racial Dispersion in Consumer Credit Interest Rates

Most of the literature exploring racial disparities in consumer credit markets focuses on the issue of access to loans. But the disparate terms on which loans are issued are equally revealing. In

The Puzzling Phenomenon of Interest‐Rate Discounts on Auto Loans

  • L. Cohen
  • Economics
    The Journal of Legal Studies
  • 1998
Given that an interest‐rate reduction appears to give something to consumers that is worth no more, and often less, to them than it costs the manufacturer, why do automobile manufacturers offer