August 15, 2025RisksOpen Access

Survival Analysis for Credit Risk: A Dynamic Approach for Basel IRB Compliance

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The estimation of default probabilities is enhanced through survival analysis, emphasizing its dynamic nature.
Simulations reveal how risk measures such as Value at Risk evolve as loans age, indicating performance sensitivity.
The model incorporates right censoring to improve predictive accuracy in assessing credit risk across diverse portfolios.
Using a dataset of 10,479 loans, this dynamic approach demonstrates practical applicability in emerging markets.

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Survival analysis estimates default probabilities in credit risk, suggesting metrics evolve based on loan age.

Dala et al. (2025) studied this question.

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