This paper demonstrates how the observed correlation between probability of default and loss given default depends on the fact that defaults in which collateral provides 100% recovery are not observed. Creditors see only the defaults of mortgagors who suffer from a fall in collateral value to...

In this paper we discuss the specification and estimation of technical efficiency in a variety of stochastic frontier production models. The focus is on cross-sectional models. We start from the basic neoclassical production theory and introduce technical inefficiency in there. Various model...

The stochastic frontier model was first proposed in the context of production function estimation to account for the effect of technical inefficiency. The inefficiency causes actual output to fall below the potential level (that is, the production frontier) and also raises production cost above...