The early repayment regarded as a competing risk is questionable, can you clarify why it is regarded as a competing risk, since this type of early settlement event will not cause the event of interest (which is default) to happen
Any reason for a customer to exit the portfolio is a risk, e.g. bad debt, early pay-off, refinance, etc. In regards to a loan portfolio, the segment of customers that pay-off early typically have a lower risk for default, e.g. they have the funds or can re-finance for a lower rate. The expected profitability of the portfolio is lowered as the portfolio is now weighted towards a population with higher default risk.
Do you know maybe if Jiahang has a paper associated with this talk? Thank you
The early repayment regarded as a competing risk is questionable, can you clarify why it is regarded as a competing risk, since this type of early settlement event will not cause the event of interest (which is default) to happen
Any reason for a customer to exit the portfolio is a risk, e.g. bad debt, early pay-off, refinance, etc. In regards to a loan portfolio, the segment of customers that pay-off early typically have a lower risk for default, e.g. they have the funds or can re-finance for a lower rate. The expected profitability of the portfolio is lowered as the portfolio is now weighted towards a population with higher default risk.
could you plz share the slides