Location of Repository

Time will tell: behavioural scoring and the dynamics of consumer credit assessment

By L.C. Thomas, J. Ho and W.T. Scherer

Abstract

This paper discusses the use of dynamic modelling in consumer credit risk assessment. It surveys the approaches and objectives of behavioural scoring, customer scoring and profit scoring. It then investigates how Markov chain stochastic processes can be used to model the dynamics of the delinquency status and behavioural scores of consumers. It discusses the use of segmentation, mover–stayer models and the use of second- and third-order models to improve the fit of such models. The alternative survival analysis proportional hazards approach to estimating when default occurs is considered. Comparisons are made between the ways credit risk is modelled in consumer lending and corporate lending

Topics: HD28
Year: 2001
OAI identifier: oai:eprints.soton.ac.uk:35747
Provided by: e-Prints Soton

Suggested articles

Preview

Citations

  1. (1982). A state wide pavement management system,
  2. (2000). A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers,
  3. (1954). A test for Markov chains,
  4. (1999). An exploration and case study of population classification for managed healthcare within a state-based modelling framework,
  5. (1992). An introduction to credit scoring,
  6. (1982). An iterative estimation and validation procedure for specification of semi-Markov models with application to hospital patient flow,
  7. (1994). Applications and solution algorithms for dynamic programming,
  8. (1992). Behaviour Scoring and Adaptive Control Systems,
  9. (1998). Business measures of scorecard benefit,
  10. (2001). Committee on Banking Supervision
  11. (1962). Estimation of allowance for doubtful accounts by Markov chains,
  12. (1968). Financial Ratios, Discriminant Analysis and the prediction of corporate bankruptcy,
  13. (2000). Lookahead scorecards for new fixed term credit products, Working
  14. (1984). Maximum likelihood estimation in the Mover-Stayer model,
  15. (2001). Modelling Bank customers’ behaviour using data warehouses and incorporating economic indicators,
  16. (2001). Modelling consumer credit risk, to appear
  17. (1999). Not if but when borrowers default,
  18. (2001). PHAB Scores; Proportional hazards analysis Behavioural Scores, to appear in
  19. (2000). Principles and practice of consumer credit risk management,
  20. (1972). Regression models and life-tables (with discussion),
  21. (2000). RiskCalc for Private companies, Moody’s default model, Moody’s Investor Services.
  22. (1992). Survival analysis and the credit granting decision, in Credit Scoring and Credit Control,
  23. (1999). Survival analysis methods for personal loan data,
  24. (1985). Testing the adequacy of Markov chains and Mover-Stayer models as representations of credit behaviour,
  25. (1970). The credit granting decision,
  26. (1951). The frequency goodness of fit test for probability chains,
  27. (1978). The use of exponentially smoothed transition matrices to improve forecasting of cash flows from accounts receivable,
  28. (1994). Three essays on contingent claims pricing,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.