Title

A Markov Chain approach to determine the Optimal Performance Period and Bad Definition for Credit Scorecard

Publication Type

Journal Article

Publication Date

10-2011

Abstract

Performance period determination and bad definition for credit scorecard has been a mix of fortune for the typical data modeler. The lack of literature on these matters led to aproliferation of approaches and techniques to solve the problems. However, the most commonly accepted approach involves subjective interpretations of the performance period and bad definition as well as being chicken and egg problem. These complications result in poorly developed credit scorecard with minimal benefits to the banks. In this paper, we will be recommending a simple and effective approach to resolve these issues.

Keywords

Credit Risk, Markov Chain, Bad Definition, Basel II

Discipline

Computer Sciences | Finance and Financial Management | Management Information Systems

Research Areas

Information Systems and Management

Publication

Research Journal of Social Science and Management

Volume

1

Issue

6

First Page

227

Last Page

234

ISSN

2251-1571

Publisher

International Journal Organisation

Additional URL

http://arxiv.org/abs/1106.4513v2