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Credit limit management using action-effect models
Published in IEEE
Pages: 112 - 115
Management (i.e. initial allocation and subsequent increase / decrease) of credit limits is one of the most critical decisions related to credit card accounts. It affects a number of variables that have direct or indirect influence on the profitability of the portfolio. This paper proposes the use of a new type of model (termed action-effect model) to study the effect of credit limit increase / decrease actions. Complex interactions between conflicting variables like credit risk, probability of attrition, credit limit utilization and revenue generated are studied. The possibility of using simulation along with action-effect models to arrive at an `optimum' credit limit for each credit card account in a portfolio is discussed.
About the journal
JournalData powered by Typeset2010 International Conference on Financial Theory and Engineering, ICFTE 2010
PublisherData powered by TypesetIEEE
Open AccessNo