A zero-inflated non default rate regression model for credit scoring data

The aim of this paper is to propose a survival credit risk model that jointly accommodates three types of time-to-default found in bank loan portfolios. It leads to a new framework that extends the standard cure rate model introduced by Berkson and Gage (1952 Berkson, J., and R. P. Gage. 1952. Survival curve for cancer patients following treatment. Journal of the American Statistical Association 47 (259):501–15.[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]) regarding the accommodation of zero-inflations. In other words, we propose a new survival model that takes into account three different types of individuals which have so far not been jointly accounted for: (i) an individual with an event at the starting time (zero time); (ii) non susceptible for the event, or (iii) susceptible for the event. Considering this, the zero-inflated Weibull non default rate regression models, which include a multinomial logistic link for the three classes, are presented using an application for credit scoring data. The parameter estimation is reached by the maximum-likelihood estimation procedure and Monte Carlo simulations are carried out to assess its finite sample performance.