Modelling profitability using survival combination scores
The paper presents the first empirical investigation of the relationship between present value of net revenue from a revolving credit account and times to default and to second purchase. The analysis is based on the data for a store card which is used to buy white durable goods in Germany. It is demonstrated that there exists a relationship between the above given measures. It appears that there is a scope for improving profit if an application for a store card is assessed by using a model which estimates the revenue and includes the survival probability of default and the survival probability of second purchase (a survival combination model) rather than merely a static probability of default predicted by a logistic regression.
profitability decision support systems risk analysis survival analysis