Classification of debtor credit status and determination amount of credit risk by using linier discriminant function

Aidi, Muhammad Nur; Sari, Resty Indah
May 2012
AIP Conference Proceedings;5/22/2012, Vol. 1450 Issue 1, p280
Academic Journal
A decision of credit that given by bank or another creditur must have a risk and it called credit risk. Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. The substantial of credit risk can lead to losses for the banks and the debtor. To minimize this problem need a further study to identify a potential new customer before the decision given. Identification of debtor can using various approaches analysis, one of them is by using discriminant analysis. Discriminant analysis in this study are used to classify whether belonging to the debtor's good credit or bad credit. The result of this study are two discriminant functions that can identify new debtor. Before step built the discriminant function, selection of explanatory variables should be done. Purpose of selection independent variable is to choose the variable that can discriminate the group maximally. Selection variables in this study using different test, for categoric variable selection of variable using proportion chi-square test, and stepwise discriminant for numeric variable. The result of this study are two discriminant functions that can identify new debtor. The selected variables that can discriminating two groups of debtor maximally are status of existing checking account, credit history, credit amount, installment rate in percentage of disposable income, sex, age in year, other installment plans, and number of people being liable to provide maintenance. This classification produce a classification accuracy rate is good enough, that is equal to 74,70%. Debtor classification using discriminant analysis has risk level that is small enough, and it ranged beetwen 14,992% and 17,608%. Based on that credit risk rate, using discriminant analysis on the classification of credit status can be used effectively.


Related Articles

  • Annual Earnings Analysis with ARIMA for Future Earnings Prediction. Andayani, Wuryan; Junaidi // Journal of Modern Accounting & Auditing;Jun2011, Vol. 7 Issue 6, p645 

    No abstract available.

  • Interfax presents fundamental efficiency rating of top 150 Russian companies. Interfax // Russia & CIS Energy Newswire;11/12/2013, p1 

    MOSCOW. Nov 12 (Interfax) - Interfax International Information Group presents the fundamental efficiency rating of the 150 largest Russian companies in the real sector of the economy for 2012.

  • The Tale of Snow White and the Deep-in-the-Red Apples. Healey, Bill // High Yield Report;6/16/2003, Vol. 14 Issue 24, p6 

    Explains the five attributes that investors should look for in their credit dealers.

  • Signal Jamming in New Credit Markets. VAN TASSLE, ERIC // Journal of Money, Credit & Banking (Ohio State University Press);May2002, Vol. 34 Issue 2, p469 

    This paper develops a simple two-period model in which a lender's credit operations in a new market end up externalizing information on borrowers' repayment capabilities. This information improves the competitive position of outside lenders by allowing them to enter the credit market with a more...

  • An Entropy Model of Credit Risk Contagion in the CRT Market. Chen, Tingqiang; Chen, Ying; Li, Xindan; Wang, Jining // Discrete Dynamics in Nature & Society;4/5/2015, Vol. 2015, p1 

    This paper reports the effect of the change in the credit status of debtors on investors as a result of the banks’ transferring of credit risk to investors in the credit risk transfer (CRT) market. Thus, an entropy spatial model is introduced, in which the spatial distance and nonlinear...

  • A Probabilistic Derivation of Heidke Skill Score. Hyvärinen, Otto // Weather & Forecasting;Feb2014, Vol. 29 Issue 1, p177 

    An alternative derivation of Heidke skill score for 2 × 2 tables is presented, starting from the assumption that a categorical forecast is useful, if the probability of an occurrence of an event, given the forecast, is greater than the base rate of the event. A tentative measure of skill...

  • FIVE TIPS FOR DEALING WITH DEADBEATS. Johnston, Lori // Gulfshore Business;May2014, Vol. 19 Issue 5, p49 

    The article offers five tips from Javier A. Pacheco, a lawyer at Porter Wright Morris & Arthur LLP and Corris McIntosh, a lawyer at Buchanan Ingersoll & Rooney/Fowler White Boggs on how to collect and handle overdue debt accounts from clients who are unwilling to pay for its debts.

  • Alan Lakey: Further evidence of lender rigidity.  // Money Marketing (Online Edition);8/31/2012, p20 

    The author comments on stern rigidity displayed by many lenders when assessing mortgage applications. He says that the process of assessing mortgage applications should be streamlined due to the experience and knowledge of the lenders. Abbey for Intermediaries issued a mortgage offer which...

  • Mediation as an Effective Alternative in Bankruptcy Litigation, Part I. Clark, Leif M. // Bankruptcy & Insolvency Litigation;Summer2013, Vol. 18 Issue 4, p12 

    The article deals with the subject of mediation in bankruptcy. Topics discussed are the reasons people avoid it, its effective use and ethical issues, as well as effective advocacy, adversarial process and settlement. Also mentioned are the forces in bankruptcy which include the creditors'...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics