Mnb One Credit-Card Portfolio
8 Pages Posted: 21 Oct 2008
A credit-card company must value portfolios of customers based on their future earnings. The payment characteristics of customers serve to classify them into states. This case can be the basis for discussing state dynamics over time in a Markov process. Students can gain an understanding of how portfolios that look good in the present may not be favorable in the long term, and how to find and use steady-state probabilities. Students can also see how changing transition probabilities affect steady-state distributions.
Keywords: banking, financial services
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