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Consumer Credit Risk
''The following article is based on UK market, other countries may differ.'' Consumer credit risk (also retail credit risk) is the risk of loss due to a consumer's failure or inability to repay ( default) on a consumer credit product, such as a mortgage, unsecured personal loan, credit card, overdraft etc. (the latter two options being forms of unsecured banking credit). Consumer credit risk management Most companies involved in lending to consumers have departments dedicated to the measurement, prediction and control of losses due to credit risk. This field is loosely referred to consumer/retail credit risk management, however, the word ''management'' is commonly dropped. Scorecards A common method for predicting credit risk is through the credit scorecard. The scorecard is a statistically based model for attributing a number (''score'') to a customer (or an account) which indicates the predicted probability that the customer will exhibit a certain behaviour. In calculating th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Default (finance)
In finance, default is failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. A national or sovereign default is the failure or refusal of a government to repay its national debt. The biggest private default in history is Lehman Brothers, with over $600 billion when it filed for bankruptcy in 2008. The biggest sovereign default is Greece, with $138 billion in March 2012. Distinction from insolvency, illiquidity and bankruptcy The term "default" should be distinguished from the terms "insolvency", illiquidity and " bankruptcy": * Default: Debtors have been passed behind the payment deadline on a debt whose payment was due. * Illiquidity: Debtors have insufficient cash (or other "liquefiable" assets) to pay debts. * Insolvency: A legal term meaning debtors are unable to pay their debts. * Bankruptcy: A legal finding tha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Natural Logarithm
The natural logarithm of a number is its logarithm to the base of the mathematical constant , which is an irrational and transcendental number approximately equal to . The natural logarithm of is generally written as , , or sometimes, if the base is implicit, simply . Parentheses are sometimes added for clarity, giving , , or . This is done particularly when the argument to the logarithm is not a single symbol, so as to prevent ambiguity. The natural logarithm of is the power to which would have to be raised to equal . For example, is , because . The natural logarithm of itself, , is , because , while the natural logarithm of is , since . The natural logarithm can be defined for any positive real number as the area under the curve from to (with the area being negative when ). The simplicity of this definition, which is matched in many other formulas involving the natural logarithm, leads to the term "natural". The definition of the natural logarithm can then b ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Logit
In statistics, the logit ( ) function is the quantile function associated with the standard logistic distribution. It has many uses in data analysis and machine learning, especially in data transformations. Mathematically, the logit is the inverse of the standard logistic function \sigma(x) = 1/(1+e^), so the logit is defined as :\operatorname p = \sigma^(p) = \ln \frac \quad \text \quad p \in (0,1). Because of this, the logit is also called the log-odds since it is equal to the logarithm of the odds \frac where is a probability. Thus, the logit is a type of function that maps probability values from (0, 1) to real numbers in (-\infty, +\infty), akin to the probit function. Definition If is a probability, then is the corresponding odds; the of the probability is the logarithm of the odds, i.e.: :\operatorname(p)=\ln\left( \frac \right) =\ln(p)-\ln(1-p)=-\ln\left( \frac-1\right)=2\operatorname(2p-1) The base of the logarithm function used is of little importance in t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Annual Percentage Rate
The term annual percentage rate of charge (APR), corresponding sometimes to a nominal APR and sometimes to an effective APR (EAPR), is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate. Those terms have formal, legal definitions in some countries or legal jurisdictions, but in the United States: :* The ''nominal APR'' is the simple-interest rate (for a year). :* The ''effective APR'' is the fee+ compound interest rate (calculated across a year). "Subject: Regulation AA", Alfred F."Bob" Blair, Jr., US Federal Reserve, 2008-06-28, webpage: US-Federal-Reserve-R1314 In some areas, the ''annual percentage rate'' (APR) is the simplified counterpart to the effective interest rate that the borrower will pay on a loan. In many countries and jurisdictions, lenders (such as banks) are required to disclose the "cost" of borrowing in some standardize ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
County Court Judgment
Description In England and Wales, County Court judgments (CCJs) are legal decisions handed down by the County Court. Judgments for monetary sums are entered on the statutory Register of Judgments, Orders and Fines, which is checked by credit reference agencies to assess the credit-worthiness of individuals. An alleged debtor is sent postal notification of an impending County Court case, and has fourteen days to respond, by paying the money, admitting owing a smaller sum, denying owing it, or going to a court hearing. If there is no response judgement will be granted against the debtor. If the debtor does not make payment in response to a CCJ, the creditor may apply for a charging order, which would secure the debt on a property. Creditors can also apply for an attachment of earnings which would oblige the debtor's employer to deduct monies from their salary and send them to the court. A third-party debt order would oblige a third party who holds money belonging to the debtor (fo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Scorecards
Credit analysis is the understanding and evaluation to check if an individual, organization, or business is worthy of credit. Credit Risk scorecards are mathematical models which use a formula that consists of data elements or variables that are used to determine a probabilistic threshold that can be used to determine risk tolerance. These scores display a defined behavior (e.g. loan default, bankruptcy, or a lower level of delinquency) with respect to their current or proposed credit position with a lender. Credit/Loan Officers are people who are employed by the bank and who are responsible for evaluating and authorizing the customer's loan application. Scorecards are built and optimized to evaluate the credit file of a homogeneous population (e.g. files with delinquencies, files that are very young, files that have very little information). Most empirically derived credit scoring systems have between 10 and 20 variables.Murray Bailey "Practical Credit Scoring: Issues and Techn ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Risk
A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, measures of borrowing costs such as yield spreads can be used to infer credit risk levels based on assessments by market participants. Losses can arise in a number of circumstances, for example: * A consumer may fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan. * A company is unable to repay asset-secured fixed or floating charge debt. * A business or consumer does not pay a trade invoice when due. * A business does not pay an employee's earned wages when due. * A business or government bond issuer does not make a payment on ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
