Default resolution times impact final loss rates, underestimating defaulted loan losses.
The time it takes to resolve defaulted bank loans affects how much money is ultimately lost. Traditional models don't fully account for this, leading to underestimations of losses. A new method using Bayesian modeling helps predict final loss rates more accurately by considering the time a loan has been in default. This approach can be applied to other situations where outcomes depend on how long a process lasts and are influenced by censoring.