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Books > Business & Economics > Economics > Econometrics > Economic statistics
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Consumer Credit Models - Pricing, Profit and Portfolios (Hardcover)
Loot Price: R3,308
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Consumer Credit Models - Pricing, Profit and Portfolios (Hardcover)
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The use of credit scoring - the quantitative and statistical
techniques to assess the credit risks involved in lending to
consumers - has been one of the most successful if unsung
applications of mathematics in business for the last fifty years.
Now with lenders changing their objectives from minimising defaults
to maximising profits, the saturation of the consumer credit market
allowing borrowers to be more discriminating in their choice of
which loans, mortgages and credit cards to use, and the Basel
Accord banking regulations raising the profile of credit scoring
within banks there are a number of challenges that require new
models that use credit scores as inputs and extensions of the ideas
in credit scoring. This book reviews the current methodology and
measures used in credit scoring and then looks at the models that
can be used to address these new challenges. The first chapter
describes what a credit score is and how a scorecard is built which
gives credit scores and models how the score is used in the lending
decision. The second chapter describes the different ways the
quality of a scorecard can be measured and points out how some of
these measure the discrimination of the score, some the probability
prediction of the score, and some the categorical predictions that
are made using the score. The remaining three chapters address how
to use risk and response scoring to model the new problems in
consumer lending. Chapter three looks at models that assist in
deciding how to vary the loan terms made to different potential
borrowers depending on their individual characteristics. Risk based
pricing is the most common approach being introduced. Chapter four
describes how one can use Markov chains and survival analysis to
model the dynamics of a borrower's repayment and ordering behaviour
. These models allow one to make decisions that maximise the
profitability of the borrower to the lender and can be considered
as part of a customer relationship management strategy. The last
chapter looks at how the new banking regulations in the Basel
Accord apply to consumer lending. It develops models that show how
they will change the operating decisions used in consumer lending
and how their need for stress testing requires the development of
new models to assess the credit risk of portfolios of consumer
loans rather than a models of the credit risks of individual loans.
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