Dynamic valuation of delinquent credit-card accounts

• Autores: Naveed Chehrazi, Thomas A. Weber
• Localización: Management science: journal of the Institute for operations research and the management sciences, ISSN 0025-1909, Vol. 61, Nº. 12, 2015, págs. 3077-3096
• Idioma: inglés
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• Resumen

  • This paper introduces a dynamic model of the stochastic repayment behavior exhibited by delinquent credit-card accounts. Based on this model, we construct a dynamic collectability score (DCS) that estimates the account-specific probability of collecting a given portion of the outstanding debt over any given time horizon. The model integrates a variety of information sources, including historical repayment data, account-specific, and time-varying macroeconomic covariates, as well as scheduled account-treatment actions. Two model-identification methods are examined, based on maximum-likelihood estimation and the generalized method of moments. The latter allows for an operational-statistics approach, combining model estimation and performance optimization by tailoring the estimation error to business-relevant loss functions. The DCS framework is applied to a large set of account-level repayment data. The improvements in classification and prediction performance compared to standard bank-internal scoring methods are found to be significant