Optimizing credit limit policies to maximise customer lifetime value
Optimizing credit limit policies to maximise customer lifetime value
This paper discusses the use of Markov Decision Process (MDP) in selecting an
appropriate credit card limit policy with the objective to maximize the profit
generated from customers. It first presents the MDP model and model properties.
It then discusses the use of low default portfolio in estimating the probability of
default in the transition matrix. The optimal policies of a case study are presented
and discussed in the paper.
markov decision process, credit card, behavioral score, profitability, probability of default
University of Southampton
So, Meko M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
November 2007
So, Meko M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
So, Meko M.C. and Thomas, Lyn C.
(2007)
Optimizing credit limit policies to maximise customer lifetime value
(Centre for Operational Research, Management Science and Information Systems Working Papers, CORMSIS-07-06)
Southampton, UK.
University of Southampton
20pp.
Record type:
Monograph
(Working Paper)
Abstract
This paper discusses the use of Markov Decision Process (MDP) in selecting an
appropriate credit card limit policy with the objective to maximize the profit
generated from customers. It first presents the MDP model and model properties.
It then discusses the use of low default portfolio in estimating the probability of
default in the transition matrix. The optimal policies of a case study are presented
and discussed in the paper.
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More information
Published date: November 2007
Keywords:
markov decision process, credit card, behavioral score, profitability, probability of default
Identifiers
Local EPrints ID: 51315
URI: http://eprints.soton.ac.uk/id/eprint/51315
ISSN: 1356-3548
PURE UUID: 292106eb-fa74-4f7b-9940-9478bc15a23f
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Date deposited: 23 Jun 2008
Last modified: 12 Dec 2021 03:38
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Contributors
Author:
Lyn C. Thomas
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