Assessment of mortgage default risk via Bayesian state space models

DOI10.1214/13-AOAS632zbMATH Open1283.62211arXiv1311.7261MaRDI QIDQ386733FDOQ386733

Authors: Tevfik Aktekin, Refik Soyer, Feng Xu 

Publication date: 10 December 2013

Published in: The Annals of Applied Statistics (Search for Journal in Brave)

Abstract: Managing risk at the aggregate level is crucial for banks and financial institutions as required by the Basel III framework. In this paper, we introduce discrete time Bayesian state space models with Poisson measurements to model aggregate mortgage default rate. We discuss parameter updating, filtering, smoothing, forecasting and estimation using Markov chain Monte Carlo methods. In addition, we investigate the dynamic behavior of the default rate and the effects of macroeconomic variables. We illustrate the use of the proposed models using actual U.S. residential mortgage data and discuss insights gained from Bayesian analysis.

Full work available at URL: https://arxiv.org/abs/1311.7261

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zbMATH Keywords

Bayesian inferencedynamic Poisson processes

Mathematics Subject Classification ID

Bayesian inference (62F15) Numerical analysis or methods applied to Markov chains (65C40) Applications of statistics to actuarial sciences and financial mathematics (62P05)

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Cited In (15)

• Monitoring foreclosure rates with a spatially risk-adjusted Bernoulli CUSUM chart for concurrent observations
• A family of multivariate non‐gaussian time series models
• Discussion of ‘Multi‐stage multivariate modeling of temporal patterns in prescription counts for competing drugs in a therapeutic category’
• A method of retail mortgage stress testing: based on time-frame and magnitude analysis
• Sequential Bayesian analysis of multivariate count data
• Identifying future defaulters: a hierarchical Bayesian method
• Sequential modeling, monitoring, and forecasting of streaming web traffic data
• Reducing estimation risk using a Bayesian posterior distribution approach: application to stress testing mortgage loan default
• Title not available (Why is that?)
• Kalman filtering and sequential Bayesian analysis
• Model selection for time series of count data
• Accuracy of mortgage portfolio risk forecasts during financial crises
• A Bayesian approach to modeling mortgage default and prepayment
• Application of the Merton model to estimate the probability of breaching the capital requirements under Basel III rules
• Assessment of mortgage default risk via Bayesian reliability models

Uses Software

• BayesDA

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