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A procedure for loss-optimising the timing of loan recovery under uncertainty
Thesis (PhD (Actuarial Science))--University of Pretoria, 2021.
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| Format: | Thesis |
| Language: | English |
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University of Pretoria
2021
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| _version_ | 1867613639456849920 |
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| access_status_str | Open Access |
| author2 | Beyers, Frederik Johannes Conradie |
| author_browse | Beyers, Frederik Johannes Conradie |
| author_facet | Beyers, Frederik Johannes Conradie |
| collection | Thesis |
| dc_rights_str_mv | © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | Thesis (PhD (Actuarial Science))--University of Pretoria, 2021. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/80843 |
| institution | University of Pretoria (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:39:20.633Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2021 |
| publishDateRange | 2021 |
| publishDateSort | 2021 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/80843 A procedure for loss-optimising the timing of loan recovery under uncertainty Beyers, Frederik Johannes Conradie arno.spasie.botha@gmail.com De Villiers, Pieter Botha, Arno UCTD Actuarial Science Data Science Operational Research Thesis (PhD (Actuarial Science))--University of Pretoria, 2021. The point at which a loan is in default is posited to be a portfolio-specific, probabilistic, and risk-based "point of no return" beyond which loan collection becomes sub-optimal if pursued any further. A method is presented for finding a delinquency threshold at which the overall loss of a given portfolio is minimised, i.e., loans are forsaken neither too early nor too late. This method, called the Loss-based Recovery Optimisation across Delinquency (LROD) procedure, incorporates the time value of money, risk-adjusted costs, and the fundamental trade-off between accumulating arrears versus forsaking future interest. The procedure is demonstrated across a range of portfolio compositions and credit risk scenarios using a simulation-based testbed. The computational results show that threshold optima can exist across all reasonable values of both the payment probability (default risk) and the loss rate (loan collateral). Furthermore, the procedure reacts positively to portfolios afflicted by either systematic defaults (due to economic downturns) or episodic delinquency (cycles of curing and re-defaulting). For real-world loans, which are typically right-censored, a forecasting step is proposed during which the remaining cash flows of each censored account are first ‘completed’ before applying the LROD-procedure. This approach is illustrated using residential mortgage data from a large South African bank. The empirical results show that riskier scenario-based forecasts of credit risk yield smaller threshold optima. Furthermore, censored cash flows are iteratively forecast in an additional Monte Carlo-based step, thereby analysing the stability of threshold optima yielded by the procedure. In conclusion, this work can enhance relevant business strategies, improve related modelling, and help revise the policy design of most banks, especially in tweaking the quantitative aspects of collection policies. Insurance and Actuarial Science PhD (Actuarial Science) Unrestricted 2021-07-15T08:25:20Z 2021-07-15T08:25:20Z 2021 2021 Thesis * S2021 http://hdl.handle.net/2263/80843 en © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf University of Pretoria |
| spellingShingle | UCTD Actuarial Science Data Science Operational Research A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title | A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title_full | A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title_fullStr | A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title_full_unstemmed | A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title_short | A procedure for loss-optimising the timing of loan recovery under uncertainty |
| title_sort | procedure for loss optimising the timing of loan recovery under uncertainty |
| topic | UCTD Actuarial Science Data Science Operational Research |
| url | http://hdl.handle.net/2263/80843 |