CLASSIFYING CREDIT CARD ACCOUNTS FOR BUSINESS INTELLIGENCE AND DECISION MAKING: A MULTIPLE-CRITERIA QUADRATIC PROGRAMMING APPROACH

Yong Shi (), Yi Peng (), Gang Kou () and Zhengxin Chen ()
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Yong Shi: Chinese Academy of Sciences Research Center on Data Technology and Knowledge Economy, Beijing 100039, China;
Yi Peng: Peter Kiewit Institute of Information Science, Technology & Engineering, University of Nebraska, Omaha, NE 68182, USA
Gang Kou: Peter Kiewit Institute of Information Science, Technology & Engineering, University of Nebraska, Omaha, NE 68182, USA
Zhengxin Chen: Peter Kiewit Institute of Information Science, Technology & Engineering, University of Nebraska, Omaha, NE 68182, USA

International Journal of Information Technology & Decision Making (IJITDM), 2005, vol. 04, issue 04, 581-599

Abstract: A major challenge in credit card portfolio management is to classify and predict credit cardholders' behaviors in a reliable precision because cardholders' behaviors are rather dynamic in nature. This is crucial for creditors because it allows them to take proactive actions and minimize charge-off and bankruptcy losses. Although the methods used in the area of credit portfolio management have improved significantly, the demand for alternative and sophisticated analytical tools is still strong.The objective of this paper is to propose a multiple criteria quadratic programming (MCQP) to classify credit card accounts for business intelligence and decision making. MCQP is intended to predict credit cardholders' behaviors from a nonlinear perspective that is justifiable because both the objective functions and constraints in credit card accounts classification may be nonlinear. Using a real-life credit card dataset from a major US bank, the MCQP method is compared with popular and similar classification methods: linear discriminant analysis, decision tree, multiple criteria linear programming, support vector machine, and neural network. The results indicate that MCQP is a promising business intelligence method in credit card portfolio management.

Keywords: Multiple criteria quadratic programming; credit card portfolio management; discriminant analysis; classification; optimization (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219622005001775

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