Spatial dependence in credit risk and its improvement in credit scoring

• Published in: European journal of operational research Vol. 249; no. 2; pp. 517 - 524
• Main Authors: Fernandes, Guilherme Barreto, Artes, Rinaldo
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.03.2016; Elsevier Sequoia S.A
• Subjects: Credit risk; Credit scoring; Default; Mathematical models; Ordinary kriging; Risk analysis; Small & medium sized enterprises-SME; SME credit risk; Spatial dependence; Studies; Brazil; Spatial dependence; SME credit risk; Risk analysis; Ordinary kriging; Credit scoring

•We discuss the local economy impact on SMEs’ credit risk.•We propose using kriging methods to incorporate the spatial dependence among firms.•We make the comparison with traditional techniques based on zip code grouping.•The proposed methodology increases the discrimination power in 6 points of Gin...