Journal of Credit Risk

Applying the zero-adjusted inverse Gaussian model to predict probability of default and exposure at default for a credit card portfolio

Rafael Rodrigues Troiani


Although the literature about measuring probability of default (PD) in retail credit portfolios is vast, the same thing cannot be said about measuring exposure at default (EAD). This paper aims to contribute toward plugging this gap, presenting the estimation of both PD and EAD of a credit card portfolio using a model based on the zero-adjusted inverse Gaussian distribution, which is a mixed discrete-continuous distribution with a mass probability for the value zero and a continuous right-skewed distribution for positive values. The paper also suggests a method for measuring accuracy in loss-prediction models by adjusting the Gini coefficient.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here