Modelling the term-structure of default risk under IFRS 9 within a multistate regression framework
This paper addresses the core challenge of inaccurate modeling of the term structure of default risk across the loan lifecycle, which undermines the timeliness and accuracy of expected credit loss (ECL) provisioning under IFRS 9. To this end, we propose a multi-state regression modeling paradigm. Methodologically, we integrate semi-Markov processes, macro-micro jointly driven transition probability modeling, Beta regression, and multinomial logistic regression to construct a three-tiered comparative framework with progressively increasing complexity. We further introduce a novel lightweight model diagnostic toolkit to systematically assess sample representativeness and multi-state model performance. Empirical validation on residential mortgage data demonstrates that increased model complexity significantly enhances predictive accuracy. Moreover, the diagnostic toolkit exhibits strong cross-scenario generalizability, thereby improving both the standardization and practical applicability of multi-state credit risk modeling in banking institutions.