Time will tell: behavioural scoring and the dynamics of consumer credit assessment
Time will tell: behavioural scoring and the dynamics of consumer credit assessment
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. An alternative survival analysis proportional hazards approach to estimating when default occurs is considered. Comparisons are made between the way credit risk is modelled in consumer lending and corporate lending.
behavioural scoring, Markov chains, survival analysis, credit risk modelling
University of Southampton
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Ho, J.
5578af0b-ee32-4cfc-90e5-d10be76c9c61
Scherer, W.T.
46b4ef0a-25c9-476a-af51-0e6056b39ffd
2001
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Ho, J.
5578af0b-ee32-4cfc-90e5-d10be76c9c61
Scherer, W.T.
46b4ef0a-25c9-476a-af51-0e6056b39ffd
Thomas, Lyn C., Ho, J. and Scherer, W.T.
(2001)
Time will tell: behavioural scoring and the dynamics of consumer credit assessment
(Discussion Papers in Accounting and Management Science, 01-174)
Southampton, UK.
University of Southampton
33pp.
Record type:
Monograph
(Discussion Paper)
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. An alternative survival analysis proportional hazards approach to estimating when default occurs is considered. Comparisons are made between the way credit risk is modelled in consumer lending and corporate lending.
More information
Published date: 2001
Keywords:
behavioural scoring, Markov chains, survival analysis, credit risk modelling
Identifiers
Local EPrints ID: 36113
URI: http://eprints.soton.ac.uk/id/eprint/36113
PURE UUID: 8eab62c0-245f-4c44-adc3-076d3a0149f3
Catalogue record
Date deposited: 25 May 2006
Last modified: 15 Mar 2024 07:55
Export record
Contributors
Author:
Lyn C. Thomas
Author:
J. Ho
Author:
W.T. Scherer
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