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A new index of creditworthiness for retail credit products

Author

Listed:
  • L Quirini

    (Consum.it – Monte dei Paschi di Siena Group)

  • L Vannucci

    (University of Florence)

Abstract

This paper introduces a novel family of indexes to describe borrowers’ creditworthiness in retail credit products, both for fixed term loans and for open-ended products such as credit cards. Each index is the ratio at a given time of the net present value of actually received cashflows to the contractual ones. Some interpretations of the indexes are given and it is also described how to link them to the profitability of the credit financial operation. For open-ended products, a competing risks survival analysis methodology is proposed to estimate the cashflow returns and illustrated with a simulation.

Suggested Citation

  • L Quirini & L Vannucci, 2010. "A new index of creditworthiness for retail credit products," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(3), pages 455-461, March.
    • Handle: RePEc:pal:jorsoc:v:61:y:2010:i:3:d:10.1057_jors.2009.68
    DOI: 10.1057/jors.2009.68
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    References listed on IDEAS

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    1. D. J. Hand & W. E. Henley, 1997. "Statistical Classification Methods in Consumer Credit Scoring: a Review," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 160(3), pages 523-541, September.
    2. G Andreeva & J Ansell & J N Crook, 2005. "Modelling the purchase propensity: analysis of a revolving store card," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(9), pages 1041-1050, September.
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