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Macroeconomic stress-testing of mortgage default rate using a vector error correction model and entropy pooling

David Ardia, Anas Guerrouaz & Jeanne Rey

Abstract We propose a methodology to perform macroeconomic stress-testing on the probability of default of a given borrowers’ population (i.e., aggregate probability of default) through simulation from a vector error correction model and entropy pooling (Meucci, 2008).
   
Keywords mortgage default probability, entropy pooling, macroeconomic variables, stress-testing, VECM
   
Citation Ardia, D., Guerrouaz, A., & Rey, J. (2016). Macroeconomic stress-testing of mortgage default rate using a vector error correction model and entropy pooling. Insurance and Risk Management, 83(3-4), 115-133.
   
Type Journal article (English)
Date of appearance 2016
Journal Insurance and Risk Management
Volume 83
Issue 3-4
Pages 115-133
URL http://www.revueassurances.ca/en/