The DSTI Gap

Measuring the impact of an inflationary shock on borrowers' repayment capacity

The DSTI Gap is an indicator that identifies the amount of excess resources, as a percentage of total revenues, available to borrowers after excluding current expenditures and debt servicing costs. It can be particularly useful in determining the distance-to-default of a bank debtor or, when risk materializes, the amount that the debtor is susceptible to default on.

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Download the paper or launch the interactive Shiny application.

Model Evaluation with Weighted Threshold Optimization (and the “mewto” R package)

Weighted threshold optimization and model performance evaluation

mewto is an R package that calculates the optimal threshold based on weighted evaluation criteria and displays related performance metrics. The package includes a visualization module for binary classification problems that plots the ROC, PR curves, as well as key statistics.

Paper available at: SSRN, ResearchGate. The code is on GitHub.

Stress-Testing a Shock to Remittances in a Post-COVID World – What Impact on Liquidity?

As a consequence of the Covid crisis and lockdown measures, the World Bank estimated a drop of 20% in remittances by the end of 2020. To study the effect that this would have on the financial stability of developing economies, the paper develops a remittance stress test that investigates the impact of the projected shock on banking sector liquidity at a country level. The study encompasses 112 countries and identifies the ten most affected nations whose banking sectors face increased liquidity risk.

Paper available at: ResearchGate and through IDEAS / RePec.