SSE/EFI Working Paper Series in Economics and Finance
No 260:
Bank Lending Policy, Credit Scoring and Value at Risk
Tor Jacobson ()
and Kasper Roszbach ()
Abstract: In this paper we apply a bivariate probit model to
investigate the implications of bank lending policy. In the first equation
we model the bank´s decision to grant a loan, in the second the probability
of default. We confirm that banks provide loans in a way that is not
consistent with default risk minimization. The lending policy must thus
either be inefficient or be the result of some other type of optimizing
behavior than expected profit maximization. Value at Risk, being a value
weighted sum of individual risks, provides a more adequate measure of
monetary losses on a portfolio of loans than default risk. We derive a
Value at Risk measure for the sample portfolio of loans and show how
analyzing this can enable financial institutions to evaluate alternative
lending policies on the basis of their implied credit risk and loss rate,
and make lending rates consistent with the implied Value at Risk.
Keywords: Banks; lending policy; credit scoring; Value at Risk; bivariate; (follow links to similar papers)
JEL-Codes: C35; D61; D81; G21; G33; (follow links to similar papers)
25 pages, September 29, 1998
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
hastef0260.pdf.zip 
(zipped) (390kB)
hastef0260.pdf (965kB)
hastef0260.ps.zip PKZipped PostScript (742kB)
hastef0260.ps PostScript file (3.77MB)
Download Statistics
- This paper is published as:
-
Jacobson, Tor and Kasper Roszbach, (2003), 'Bank Lending Policy, Credit Scoring and Value at Risk', Journal of Banking & Finance, Vol. 27, April, No. 4, pages 615-633
Questions (including download problems) about the papers in this series should be directed to Björn Thodenius ()
Report other problems with accessing this service to Sune Karlsson ()
or Björn Thodenius ().
Programing by
Design by Joachim Ekebom
