Hans Byström: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Abstract: In this paper (letter) I discuss how blockchains potentially could affect the way credit risk is modeled, and how the improved trust and timing associated with blockchain-enabled real-time accounting could improve default prediction. To demonstrate the (quite substantial) effect the change would have on well-known credit risk measures, a simple case-study compares Z-scores and Merton distances to default computed using typical accounting data of today to the same risk measures computed under a hypothetical future blockchain regime.
12 pages, March 2, 2016
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