Related papers: Debt Aversion: Theory and Measurement
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…
The present study investigates the psychological and behavioral implications of integrating AI into debt collection practices using data from eleven European countries. Drawing on a large-scale experimental design (n = 3514) comparing human…
The authors examine the concept of probability of default for asset-backed loans. In contrast to unsecured loans it is shown that probability of default can be defined as either a measure of the likelihood of the borrower failing to make…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
The estimate of a Multiperiod probability of default applied to residential mortgages can be obtained using the mean of the observed default, so called the Mean of ratios estimator, or aggregating the default and the issued mortgages and…
This study focuses on the impact of digital finance on households. While digital finance has brought financial inclusion, it has also increased the risk of households falling into a debt trap. We provide evidence that supports this notion…
We analyze recently proposed mortgage contracts that aim to eliminate selective borrower default when the loan balance exceeds the house price (the ``underwater'' effect). We show contracts that automatically reduce the outstanding balance…
Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…
This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…
We propose a consumption-investment decision model where past consumption peak $h$ plays a crucial role. There are two important consumption levels: the lowest constrained level and a reference level, at which the risk aversion in terms of…
Consumer protection rules require companies that deploy models to automate decisions in high-stakes settings to explain predictions to decision subjects. These rules are motivated, in part, by the belief that explanations can promote…
A principal hires an agent to acquire soft information about an unknown state. Even though neither how the agent learns nor what the agent discovers are contractible, we show the principal is unconstrained as to what information the agent…
Policy learning algorithms are widely used in areas such as personalized medicine and advertising to develop individualized treatment regimes. However, most methods force a decision even when predictions are uncertain, which is risky in…
When developing software, it is vitally important to keep the level of technical debt down since it is well established from several studies that technical debt can, e.g., lower the development productivity, decrease the developers' morale,…
This study provides first empirical evidence on the impact of entrepreneurs' financial knowledge on borrower discouragement. Using novel survey data on Italian micro-enterprises, we find that less financially knowledgeable entrepreneurs are…
This article proposes a method for measuring the latent risks involved in the recovery process of non performing loans in financial institutions and business firms that deal with collection and recovery processes. To that end, we apply the…
One of the long term goals of any college or university is increasing the student retention. The negative impact of student dropout are clear to students, parents, universities and society. The positive effect of decreasing student…
Balancing the management of technical debt within recommender systems requires effectively juggling the introduction of new features with the ongoing maintenance and enhancement of the current system. Within the realm of recommender…
This paper proposes a model of decision-making under uncertainty in which an agent is constrained in her cognitive ability to consider complex acts. We identify the complexity of an act according to the corresponding partition of state…