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Implementing a credit risk management system based on innovative scoring techniques

Delamaire, Linda (2012)
Ph.D. thesis, University of Birmingham.

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In recent years, most developed countries have suffered a severe recession due to a financial crisis starting in the US with mortgages loans. The lack of credit risk management has been pointed out as one of the causes of this bank panics. To avoid a similar situation, the credit card companies need to have proper risk management tools. This thesis presents a credit scoring system which aims at setting credit lines and thus, controlling credit risk. It includes three types of models: application scorecards, early detection scorecards and behavioral scorecards. They have been built on real and recent data coming from a German credit card company. The models have been built with a training sample and validated accordingly, using logistic regression. Information value and validation charts have been used for comparing the models. In the scoring process described, the scorecards are used in a sequential order. The author shows that minimizing losses might not be optimal in order to maximize profit. Finally, the author presents possible extensions to the research. The author hopes that the microeconomic analysis of the mechanics of a particular lender’s credit allocation process described in this thesis can play some part in preventing future financial crisis.

Type of Work:Ph.D. thesis.
Supervisor(s):Sinclair, Peter and Dickinson, David G.
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Department:Department of Economics
Subjects:HG Finance
Institution:University of Birmingham
ID Code:3344
This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder.
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