Credit Scoring Its Effects And Diffusion Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 1976 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Cause and effect essay Did you like this example? Introduction Credit scoring is a statistically derived numeric expression of a persons creditworthiness  that is used by lenders to access the likelihood that a person will repay  his or her  debts.  A credit score is based on, among other things, a persons past credit history. Credit scoring, using standardized formula is a measurement of  credit risk.  Factors  that can reduce  a credit  score  includes   absence of  credit  references, and late payments, and unfavourable  credit card  use. By using a credit score,  lenders determine  whether to grant a  loan, what  rate  to  charge and also the term.   For example, borrowers with a credit score that is under 600 will be unable to receive a prime mortgage and will typically need to go to a subprime lender for a subprime mortgage, in which will typically have a higher interest rate.. Don’t waste time! Our writers will create an original "Credit Scoring Its Effects And Diffusion Finance Essay" essay for you Create order The designation for credit scoring is the FICO score is the single best summary score of ones credit worthiness. .A credit score number is often called a FICO score, a California company that developed the system upon which it is based. The score is supposed to distils all the information in your credit report, using a formula to calculate a single number that indicates your credit worthiness. Its designed to give lenders a fast, accurate prediction of the risk involved in giving you a loan. Lenders have attested to the scores value in streamlining the underwriting process and creating more opportunities for consumers to get mortgages. Scores range from the 300s to about 900, with the vast majority of folks falling in the 600s and 700s. The higher the score, the better. Literature Review Credit scoring: its effects and diffusion in the early stage A study was conducted by Jalal Akhavein, Scott Frame, and Lawrence (2005) to illustrate the effects of the introduction of credit scoring on small business credit market and determine the factors that influence the adaptation of this financial innovative among large banking organization during the middle 1990s. Jalal Akhavein, Scott Frame, and Lawrence (2005) stated that there were effects on borrower-lender interactions, loan pricing and credit availability since the introduction of credit scoring.They claimed that borrower-lender interactions might contract since credit scoring allowed lenders to grant or reject loans without physically meeting the borrower. They further stated the credit scoring might influence the price of credit as lenders would offer different price to borrowers according to the score gained. Regarding the availability of credit, they concluded there might be a rise in the number of credit, because cheaper or better information about the repayment prospects allowed lenders to price the credit accordingly, rather than rejecting loan out of fear. Jalal Akhavein, Scott Frame and Lawrence (2005) discussed how the three variables market variables, firms variables and Chief Executive Officer (CEO) variables influence the adaptation of credit scoring. According to the study, banks with market power and in less-concentrated markets relatively tended to adopt new technology credit scoring. The study also suggested that larger banking firms were more likely to adopt new technology because of their economies of scale and ability to pool risk. As suggested by the study, the personal characteristics of CEO had great influences on the adaptation of credit scoring as they had great power over decision making. Construction of credit scoring using data mining and its classification performance A study was conducted by Yap Bee Wah, Ong Seng Huat and Mohamed Husain Nor Huselina (2011) to demonstrate the use of data mining by using credit scoring models to assess credit worthiness and predict default in payment. In the study, credit scoring techniques was applied with the data of payment history of members from a recreational club which had been facing rising subscription fees payment defaults. To identify defaulters, the club used credit scorecard model, logistic regression model and decision tree model, and the performances were compared. The respective error rates are were 27.9%, 28.8% and 28.1%. The study concluded that although no models outperform the other, it is relatively easier to adopt scorecards (Bee Wah , Seng Huat Nor Huselina, 2011). Data mining is the process of extracting useful information from a large database, and this technique has been generally used in many fields, such as banking, finance, telecommunication, manufacturing, healthcare, insurance and others (Bee Wah, Seng Huat Nor Huselina, 2011). As stated by Bee Wah, Seng Huat and Nor Huselina Mohamed Husain, to construct a credit scoring models, data mining techniques is required. They explained useful historical data on payment obtained through data mining could help identify the important the demographic characteristic related to different credit risk and give a score for each borrower. They further suggested some sophisticated data mining software such as ANNs, MARS and SVM . Despite the usefulness of data mining, the study (2011) stated that there are limitations to construct credit scoring models. First, it is subjected to poor quality or unavailability of the data. Secondly, since it is based on historical data, bias occurs when the models are applied to new borrower. Therefore, the study concluded that there is no best model to evaluate credit worthiness, despite of the easy-to-use feature of credit scoring. Credit scoring in developing countries A study is conducted by Thanh Dinh and Stefanie (2007) to identify the borrower characteristics related to default risk and how the use of credit scoring models in the in developing countries such as Vietnam. Thanh Dinh and Stefanie (2007) stated, As the credit market in developing countries such as Vietnam become mature, banks benefit from credit growth, but also face increasing competition of local banks and sophisticated foreign banks. Thus, local banks started to change from relationship banking to transaction banking by adopting credit scoring model (CSM). They further claimed small banks or micro-financiers unable to collect complete and sufficient data of the borrower characteristics and their credit histories to design reliable CSMs. These data include borrowers income, collateral, character, reputation, and standing in the community. Therefore, to overcome the problem, they suggested the banking markets in developing countries must be matured enough to have a large database. Based on the case study in Vietnam, Thanh Dinh and Stefanie (2007) concluded significant advantages can be observed. First and foremost, CSM help to reduce default rate. Also, it helps banks to run risk-based pricing to manage its loan portfolio. Finally, can reduce the time and cost spent by the loan officer on loan assessment. Overall, it increases the competitiveness of the banks. Proposed Credit Scoring Model: Reassign Credit Scoring Model (RCSM) Due to the wave of financial innovation, more and more companies were forming better strategies with the help of credit scoring models. Hence, during the past decades, various credit scoring techniques models have been developed to keep on improving for a better credit approval scheme. (Rong-Ho Chun-Ling, 2009). These models include linear discriminant analysis (LDA), logistic regression (LR), multivariate adaptive regression splines (MARS), classi ¬Ãƒâ€šÃ‚ cation and regression tree (CART), case based reasoning (CBR), and arti ¬Ãƒâ€šÃ‚ cial neural networks (ANNs). A model is proposed by Rong-Ho and Chun-Ling (2009) called reassign credit scoring model (RCSM). As claimed by them, the hybrid model combined ANNs, MARS and CBR approaches to eliminate the Type 1 errors rejecting good credit applicants. They further explained, RCSM model is divided to 2 phase, MARS first obtains input variable, ANNs then classify credit applicants into good or bad credit group ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦Consequently, CBR revaluate the rejected applicants by ANNs by comparing the similarities between rejected cases and CBR database which contains good and bad casesÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ lastly, by looking at the amount of SG(similarities with good database case) and SB(similarities with bad database case), it classifies the rejected applicants into conditional accepted and rejected classes. Figure 1 show the process of RCSM. Rong-Ho and Chun-Ling (2009) stated that the proposed RCSM demonstrated the advantages of MARS, ANNs and CBR, the model eliminates Type I error and increases the approval rate of credit, potentially, increasing banks revenue. Even though the misclassification cost of Type II error (reassigning a rejected customer as good when they are actually bad) was higher than Type I error, the cost could be decreased while increasing Type I errors were eliminated (Rong-Ho Chun-Ling, 2009). Figure 1: The process of RCSM. Source: Rong-Ho, L., Chun-Ling, C. (2009). Constructing a reassigning credit scoring model. Expert Systems with Applications, 36(2), 1685-1694 Recommendation and Conclusion Improve Data Mining Quality To improve data quality, we suggest that the organization need to ensure the imprecise data to be cleaned in order to get more useful and efficient mining. We suggest that they should clean the unnecessary data frequently. They can remove the duplicate records, normalizing the values or number in representing information in the database. For example, no is represented as a 0, cross or sometimes even as a N, X and so on throughout the database. Besides, they also can removing unuseful data fields by identifying anomalous data points. For example, they can remove individuals whose age between 120-130. Moreover, they also can improve the data quality by standardizing data formats to avoid bias concept. For example, all the date is using DD/MM/YYYY format. This can let all the data look more consistence so that they can avoid some error that may face by user. Lastly, they also should carefully verify the information before database entry, make sure the credibility, authenticity and fidel ity of data. In my opinion, they should have some expertises for database checkups regularly to ensure that old data is refreshed and continues to perform wisely for the coming year. Sensitive to the changes of economic As our suggestions, Credit scoring should take consideration to the changes in economic such as inflation or deflation. High inflation could slow down the economic growth and hence credit growth. This is because economic fluctuation might effect the consumer behavior , amount of loan as well as the capacity of individual. Therefore, we suggest that credit scoring should come out with different steps and evaluation based on different economic situation . For example, during recession , the credit score should be more tight and should charge higher interest rate due to the default risk is higher. In short, economic circumstances can be an extra predictive information in credit scoring, in order to forecast the future credit performance of the individual efficiency, bankers should consider both individual and economic situation before making credit evaluation. Improve in diffusion of small business credit scoring in early stage To improve in small business in credit scoring in early stage, we suggest the banking organization to restate the score for each new applicants of credit. This might clear the old data and restructure again scores for accurate determination on eligibility for loan. For example, scores for last month might differ from scores for this month. Besides that, organization should hire a special agent to check the information given is valid or not as the information of applicant might differs in other banks. Other than that, we suggest the CEO of banking organization to have a briefing given by for example Federal Bank, this will ensure any new technology implementation on credit scoring is reliable and this also gives confident and limitation for manager to make decision on credit scoring pertaining issues. The diffusion of small business credit scoring is more likely to develop in future as technology advance makes things easier with less risk. Reassign credit scoring model (RCSM) As reassign credit scoring model (RCSM) might only provide credit manager with numerical scores which is insufficient for the credit manager for explain negative credit decision. Thus, we suggest RCSM to have some explanations in neither accepting nor rejecting the loans. Furthermore, the professionally designed, tested and validated credit scoring model can be expensive for the banking organization to purchase them. Thus, we suggest the reassign credit scoring model to customize the needs of each bank so that mimic the decision making style and the risk tolerance of the companies can be reduced.

Tobacco Companies in Our Society Essay - 2017 Words

Tobacco Companies in Our Society The tobacco industry seems like a beneficial addition to our economy. It has basically been a socially acceptable business in the past because it brings jobs to our people and tax money to the government to redistribute; but consider the cost of tobacco related treatment, mortality and disability- it exceeds the benefit to the producer by two hundred billion dollars US. (4) Tobacco is a very profitable industry determined to grow despite government loss or public health. Its history has demonstrated how money can blind morals like an addiction that is never satisfied. Past lawsuits were mostly unsuccessful because the juries blamed the smoker even though the definition of criminal negligence fits the†¦show more content†¦Even though they blame its success on peer pressure the companies internal documents show otherwise. (2.a) Most of the evidence was industry studies on new smokers and how to attract them. One expert testimony showed that 90 % of six-year-olds recognized the popular characters on cigarette packs like Joe camel to be as familiar as Mickey Mouse and other childhood heroes. (3) Media advertising has a very subtle yet powerful effect on people and the tobacco companies have taken full advantage of its tools. The tests using underage smokers reveal the industry’s disrespect for the law. In an experiment called ‘Project 16,’ Imperial Tobacco hired smokers as young as 16 who were interviewed and observed through closed circuit cameras. This revealed popular smoking conventions and traits of young smokers that was an asset in classifying different targets into sections which are reflected through different brands. This practice was pretty common among tobacco companies and are expressed in documents such as Imperial’s â€Å"Fiscal ’80 media plan.† (1.169) They pursued this project further with another one called plus/minus, which had success in finding that cigarettes targeted to kids should be more bland since irritation would turn them off to cigarettes. Later another project called ‘starting’ had similar types of psychological probing but was a lot more effective.Show MoreRelatedEnough is Enough1321 Words   |  6 PagesTobacco, once recreationally customary and signified one as being â€Å"cool† has done a substantial 180 degree turn. With the knowledge that came along with the 20th century also came the harsh truth that tobacco causes illness and disease. Recently the use of tobacco has been brought into our governments legislations and state laws prohibiting tobacco use in varies of ways. With designated smoking areas outside and in parks. 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The arguments in favor of the government banning tobacco advertising generally begins with the belief that the government has the right to intervene in the best interest of its citizens. The banning of cocaine, which is generally seen as worldwide, is often used as an example of this. Public health is often the motive that is cited when countries such as Belgium andRead MoreBan On Advertising For Tobacco Smoking901 Words   |  4 Pagesadvertising for tobacco smoking. On Feb 6, 2001, the Government of India announced they would impose a ban on advertising for tobacco smoking. Healthcare reports identified smoking tobacco was the leading cause of preventable deaths. Smoking tobacco caused cancer, lung disease, chronic obstructive pulmonary disease (COPD), emphysema and chronic bronchitis. The increase in illness and death related to tobacco smoking prompted the Indian Government to propose a ban of all forms of tobacco advertising

Similarities Between Heart Of Darkness And Apocalypse Now

The Heart of Darkness, by Joseph Conrad, illustrates one’s voyage on the Congo River, into the heart of darkness of Africa, told by the narrator Charles Marlow. Similar to the novel, Apocalypse Now focuses on a captain in the Vietnam War ordered to assassinate a colonel, named Kurtz. Each of these works convey an important time in American history, highlighting the era of imperialism and that of the Vietnam War. Overall, Apocalypse Now can be seen as a direct parallel to Heart of Darkness, shown through similarities in characters, such as Marlow and Kurtz, the general plot line, and in the themes of power and madness. In order to compare the novel, Heart of Darkness, to that of Apocalypse Now, one needs identify the similarities in†¦show more content†¦From the beginning of the movie, Willard explains the darkness overwhelming the split nation of Vietnam, and just like Willard, Marlow tells of the same thing, addressing the darkness louring over Africa. Each of these man, while travelling through the unknown, begin to recognize the differences in civilization between the area that they are exploring and their home nation. Another essential character found in Heart of Darkness and Apocalypse Now includes a man named Kurtz. In the novel, Kurtz is in charge of an ivory station in the heart of Africa, being one of the most successful ivory traders for his company. In the movie, Kurtz is a West Point graduate who went through the ranks of military fairly quickly, landing him the title of Colonel. As one of his missions, Colonel Kurtz was ordered to create a native army, in which he successfully completes. Both of these men come to be worshipped by the natives of the areas they overtake. They lead their groups to achieve goals relevant to the plot line. For Kurtz, in the novel, he allows the native population to become his workers, working at the station to hunt ivory. In the movie, Apocalypse Now, Kurtz uses the native population he acquires as a stand-alone army in that of the Vietnam War. Due to the commitment the men make, they become to be portrayed as insane, being put off as madmen by commanding offi cers of each of the companies they work for. Although their deaths occurShow MoreRelatedSimilarities And Differences Between Heart Of Darkness And Apocalypse Now1023 Words   |  5 PagesThe film Apocalypse Now and the novel Heart of Darkness share many similarities including small details, characters, and themes. Both are told from the same type of narrative and have similar settings. There are small differences as well, including the main character’s purpose and how one of the characters dies. The novel is the story of a trip into Africa, which a character is overhearing the retelling of the journey. This is similar to the movie, in which the viewer hears the main character tellRead More Transformation in Heart of Darkness and Apocalypse Now Essay1685 Words   |  7 PagesTransformation in Heart of Darkness and Apocalypse Now      Ã‚  Ã‚  Ã‚   Since Francis Ford Coppola’s   Apocalypse Now was based on Joseph Conrads novel, Heart of Darkness, it is possible to draw many parallels between the two works. Both can be interpreted as metaphors for a journey through the inner self, and each has its own particular message to convey. In many ways they also appear to have similarities to Arthurian Legend, in particular the quest for the holy grail, and other allegorical journeyRead More Comparing Marlow of Heart of Darkness and Willard of Apocalypse Now1512 Words   |  7 PagesComparing Marlow of Heart of Darkness and Willard of Apocalypse Now      Whenever books are adapted for film, changes inevitably have to be made. The medium of film offers several advantages and disadvantages over the book: it is not as adept at exploring the inner workings of people - it cannot explore their minds so easily; however, the added visual and audio capabilities of film open whole new areas of the imagination which, in the hands of a competent writer-director, can more than compensateRead MoreComparative Essay1096 Words   |  5 Pagesanalysis: â€Å"Heart of Darkness† â€Å"Apocalypse Now† Student: Mora Vandenbroele Teacher: Azucena Estigarribia Year: 11th â€Å"A† â€Å"Heart of Darkness† vs. â€Å"Apocalypse Now† It is very interesting how humans are so intrigued about the evilness in the world, and the dedication of some men to compare Hell with the Earthly horror. Joseph Conrad, a genius writer, took his time to show this with his masterpiece â€Å"Heart of Darkness† that wasRead More Heart of Darkness, Hollow Men, and Apocalypse Now Essay1398 Words   |  6 PagesSimilarities between Heart of Darkness, Hollow Men, and Apocalypse Now      Ã‚  Ã‚   In todays literary world there are many different texts that have interlocking literary meaning through their references to one another and to other works. I am going to compare and draw similarities between T.S. Eliot’s The Hollow Men, Joseph Conrads Heart of Darkness, and Francis Ford Coppolas Apocalypse Now. These three sources have many different references to one another in different ways. In T.S. EliotsRead MoreParallels Between Heart of Darkness and Apocalypse Now1871 Words   |  8 PagesVarious parallels can be drawn when comparing and contrasting Joseph Conrads Heart of Darkness and Frank Coppolas Apocalypse Now, while taking into consideration Heart of Darkness is a novella and Apocalypse Now is a film. These differences and similarities can be seen in themes, characters, events and other small snippets of information including anything from quoted lines to strange actions of the main characters. Both pieces follow the same story line but they are presented in differentRead MoreEssay on heart of darkness1844 Words   |  8 Pages Various parallels can be drawn when comparing and contrasting Joseph Conrads Heart of Darkness and Frank Coppolas quot;Apocalypse Nowquot;, while taking into consideration Heart of Darkness is a novella and quot;Apocalypse Nowquot; is a film. These differences and similarities can be seen in themes, characters, events and other small snippets of information including anything from quoted lines to strange actions of the main characters. Both pieces follow the same story line but they are presentedRead MoreComparing Joseph Conrad’s novel â€Å"Heart of Darkness† and Francis Ford Coppola’s film â€Å"Apocalypse Now†1235 Words   |  5 PagesThe focus of this Comparative Essay is to evaluate the similarities between Joseph Conrad’s novel â€Å"Heart of Darkness† and Francis Ford Coppola’s film â€Å"Apocalypse Now.† Resemblances in both stories are prominent when reading the novel or watching the film. The resemblance which will be used in this essay will be the similarities between the protagonists in both stories, Charlie Marlow and Captain Benjamin L. Willard. Both men are in search of two other individuals that go by the same name, Kurtz.Read More Comparative Essay of Heart of Darkness and Apocalypse Now1050 Words   |  5 PagesComparative Essay of Heart of Darkness and Apocalypse Now The ties between Joseph Conrads book, â€Å"Heart of Darkness† and Francis Coppolas movie, â€Å"Apocalypse Now† are unmistakable. Apocalypse Nows correctness in following the story line of the Heart of Darkness is amazing although the settings of each story are from completely different location and time periods. From the jungle of the Congo in Africa to the Nung river in Vietnam, Joseph Conrads ideals are not lost. In both the bookRead MoreEssay on Compare and Contrast Heart of Darkness/Apocalypse Now1353 Words   |  6 PagesApocalypse Now, directed by Francis Ford Coppola, is the story of Captain Willards journey up the Nung River in Cambodia to kill a general, Kurtz, who has lost control of himself. It is set in the Vietnam War and is a very gritty and affecting film. Imagine my surprise when I learned that it was sort of based on Joseph Conrads famous novella, Heart of Darkness. Conrads book, the tale of the sailor Marlowes African adventure, is a study on the evils of colonialism. The two stories at first glance

Utopia Securing a Society free essay sample

The paper examines how sin and divine retribution can control a society, as set out in Mores Utopia. This paper discusses the book Utopia, and how Sir Thomas More explores how a society can be controlled by the threat of divine retribution. The author examines Mores position that the only way to deter man from the pleasures of sin was the possibility of divine retribution by exploring, for example, the spiritual entity, Mithra and the punishment of criminals. The paper also looks at the political and religious atmosphere prevalent in More?s society. The picture painted by Sir Thomas More in his book, Utopia can be interpreted by different people in different ways. Some leave the experience with the understanding that More was a visionary with a highly detailed view of the future, whereas others see him as a man yearning for a monastic past. Whichever interpretation is correct, and there are many gradations between the two, Sir Thomas More can be seen as a man who held the notion that man had a natural propensity for sin. We will write a custom essay sample on Utopia: Securing a Society or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page He believed that sin, especially pride, was divisive to both man and society. More felt that the only way to deter man from the pleasures of sin was to threaten him with the possible pains of divine retribution.