Loan Policy Selection

Example model

Description: A lender has a large pool of money to loan, but needs to decide what credit rating threshold to require and what interest rate (above prime) to charge. The optimal value is determined by market forces (competing lenders) and by the probability that the borrower defaults on the loan, which is a function of the economy and borrower's credit rating. The model can be used without the Analytica optimizer, in which case you can explore the decision space manually or use a parametric analysis to find the near optimal solution. Those with Analytica Optimizer can find the optimal solution (more quickly) using an NLP search.

Best used with Analytica Optimizer

Keywords: Creditworthiness, credit rating, default risk, risk analysis

Author: Lonnie Chrisman

Download: Loan policy selection.ana