SC3-Chapter 20 - Managing Credit Risk on the Balance Sheet 4

SC3-Chapter 20 - Managing Credit Risk on the Balance Sheet...

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3/17/11 Online Credit Risk Analyzer Credit Analyzer Models http://www.creditanalyzer.com/model s 11
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3/17/11 22 Many stock screeners allow investors to screen on Z-Score. These companies where identified by screening for low Z- Score companies.
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3/17/11 33 Credit Scoring Credit scoring models provide objective, low cost, an quick evaluation methods that are especially suited for smaller loans credit scoring is most common for loans sizes below $300,000 more homogeneous (i.e. similar) types of loans residential mortgage auto small business
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3/17/11 44 Credit Scoring Credit scoring is used most often when lending to consumers and small businesses – why? the numbers of transactions (loans) are high not cost effective for the lender to gather and analyze credit information on each application the dollars amounts are relatively low rejection of the applicant will have little impact on revenues default by an applicant will not have a significant impact on earnings or capital (provisions and reserves) information requirement is low compared to mid-market and large commercial loans AgScore
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3/17/11 55 Benefits to Credit Scoring Speed Consistent Accuracy same decision rules for each customer reduced human error Reduced Bad Debt Losses prediction accuracy Reduced Personnel Costs Can be used to sort customers into
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3/17/11 66 Benefits of Credit Scoring- cont. Decision support and planning tools
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This note was uploaded on 03/16/2011 for the course FIN 4324 taught by Professor Clark during the Spring '11 term at FSU.

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SC3-Chapter 20 - Managing Credit Risk on the Balance Sheet...

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