The University of Southampton
University of Southampton Institutional Repository

Modelling the profitability of credit cards by Markov decision processes

Record type: Article

This paper derives a Markov decision process model for the profitability of credit cards, which allows lenders to find an optimal dynamic credit limit policy. The states of the system are based on the borrower’s behavioural score and the decisions are what credit limit to give the borrower each period. In determining which Markov chain best describes the borrower’s performance, second order as well as first order Markov chains are considered and estimation procedures developed that deal with the low default levels that may exist in the data. A case study is given in which the optimal credit limit is derived and the results compared with the actual outcomes.

Full text not available from this repository.

Citation

So, M.C. and Thomas, L.C. (2011) Modelling the profitability of credit cards by Markov decision processes European Journal of Operational Research, 212, (1), pp. 123-130. (doi:10.1016/j.ejor.2011.01.023).

More information

Published date: 1 July 2011
Organisations: Management, Southampton Business School

Identifiers

Local EPrints ID: 177817
URI: http://eprints.soton.ac.uk/id/eprint/177817
ISSN: 0377-2217
PURE UUID: 1305b3b5-4467-4ae4-b56f-6928b1419c93

Catalogue record

Date deposited: 22 Mar 2011 15:24
Last modified: 18 Jul 2017 12:05

Export record

Altmetrics

Contributors

Author: M.C. So
Author: L.C. Thomas

University divisions


Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×