A new mixture cure model under competing risks to score online consumer loans
Zhang, Nailong Yang, Qingyu Kelleher, Aidan Si, Wujun
Zhang, Nailong
Yang, Qingyu
Kelleher, Aidan
Si, Wujun
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2019-01-18
Type
Article
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Keywords
Risk management,Mixture cure model,Survival model,Credit scoring,Competing risks
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Citation
Nailong Zhang, Qingyu Yang, Aidan Kelleher & Wujun Si (2019) A new mixture cure model under competing risks to score online consumer loans, Quantitative Finance
Abstract
In credit scoring, survival analysis models have been widely applied to answer the question as to whether and when an applicant would default. In this paper, we propose a novel mixture cure proportional hazards model under competing risks. Most existing mixture cure models either do not consider competing risks or generally assume that a subpopulation of subjects is immune to any risk from all the competing risks. Compared with existing models, the proposed model is more flexible since it assumes that a subpopulation of subjects is immune to a subset of risks instead of being immune to all the risks. To estimate model parameters, we derive the likelihood function of the proposed model, based on which an expectation maximization estimation algorithm is developed. A simulation algorithm is designed to simulate time-to-event observations from the proposed model, and simulation studies are conducted to verify the proposed methodology. A real world example of credit scoring for online customer loans based on the proposed model is demonstrated.
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Publisher
Routledge
Journal
Book Title
Series
Quantitative Finance;2019
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ISSN
1469-7688