Samsung card lending model |
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Authors: | Jaeyung Huh Woojin Chang Junghoon Lee Jaeyong Lee |
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Affiliation: | 1. Risk Management Division, Samsung Card Company, Republic of Korea;2. Department of Industrial Engineering, Seoul National University, Republic of Korea;3. Technology Management Economics and Policy Program, Seoul National University, Republic of Korea |
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Abstract: | Samsung Card Lending Model (SCLM) analyzes cash flow in individual accounts and measures the level of company-wide risk. Serving as a risk and portfolio management model in the consumer lending business, the main features of SCLM are as follows. Default ratios such as intrinsic balance default probability and annual default ratio are computed using the past, present, and future cash flows of accounts. The provision is shown as the total sum of write-offs. The size of capital required is determined by default probability distribution. The price for new accounts is quoted based on cash flow simulations reflecting future business environments. SCLM has shown good performance in Samsung card consumer lending business since the Korean credit card crisis of 2003. |
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Keywords: | Consumer lending business Credit risk Default probability Provision Capital required |
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