Modelling profitability using survival combination scores |
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Authors: | Galina Andreeva Jake AnsellJonathan Crook |
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Affiliation: | Credit Research Centre, Management School and Economics, The University of Edinburgh, 50 George Square, Edinburgh, Scotland EH8 9JY, UK |
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Abstract: | The paper presents the first empirical investigation of the relationship between present value of net revenue from a revolving credit account and times to default and to second purchase. The analysis is based on the data for a store card which is used to buy ‘white’ durable goods in Germany. It is demonstrated that there exists a relationship between the above given measures. It appears that there is a scope for improving profit if an application for a store card is assessed by using a model which estimates the revenue and includes the survival probability of default and the survival probability of second purchase (a survival combination model) rather than merely a static probability of default predicted by a logistic regression. |
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Keywords: | Decision support systems Risk analysis Survival analysis Profitability |
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