Between the end of the last recession in the first quarter of 1991 and the second quarter of 1997, consumer revolving credit outstanding, which includes consumer credit card debt, more than doubled—from $247 billion to $514 billion. The rapid rise of consumer debt, especially credit card debt, generated much discussion about its cause, sustainability, and implication despite the fact that credi...

Now-a-days, the offer of credit period to the customer for settling the account for the units purchased by the supplier is considered to be the most beneficial policy. In this article, an attempt is made to formulate the mathematical model for a customer to determine optimal special cycle time when the supplier offers the special extended credit period for one time only during a special period....

In this article, we investigate why merchants accept credit cards for payment despite the relatively high cost of processing these types of transactions. A two-period model is constructed to determine under what conditions a credit card equilibrium would exist. The results of the model indicate that when the cost of funds is not too high and when the merchant’s profit margin is sufficiently hig...

This paper derives a model for the profitability of credit cards, which allow lenders to find the optimal dynamic credit limit policy. The model is a Markov decision process, where the states of the system are based on the borrower’s behavioural score and the decisions are what credit limit to give the borrower each period. In determining the Markov chain which best describes the borrower’s per...

In the reduced-form approach to credit modeling, default intensity has been found to depend on several firm-specific factors, most notably credit rating. But aggregate default rates also vary substantially over time, presumably reflecting changes in general economic conditions. In this paper, we fit Cox intensity models for major credit events, including defaults as well as major upgrades and d...

We construct a new credit spread index, employing an extensive micro-level data set of secondary market prices of outstanding senior unsecured bonds over the 1973– 2009 period. Compared with the standard default-risk indicators such as the Baa-Aaa corporate bond spread and the paper-bill spread, our credit spread index is a robust predictor of future economic activity across a variety of econom...

Temporary crediting of carbon storage is a proposed instrument that allows entities with emissions reductions obligations to defer some obligations for a fixed period of time. This instrument provides a means of guaranteeing the environmental integrity of a carbon sequestration project. But because the user of the temporary credit takes on the liability of renewing it, or replacing it with a pe...

In this paper, we validate the performance of Moody’s KMV EDF credit measures in its timeliness of default prediction, ability to discriminate good firms from bad firms, and accuracy of levels in three regions: North America, Europe, and Asia. We focus on the period 1996–2006 for most of our tests. Wherever possible, we compare the performance to that of other popular alternatives, such as agen...

A two-stage procedure is employed to evaluate the determinants of merger and acquisition (M&A) activity in Australian credit unions over the period 1992/93 to 1994/95. In the first stage, data envelopment analysis is used to calculate technical and scale efficiency indices for a sample of credit unions. The second stage uses a multinomial logit model to relate credit union efficiency scores, al...