Profitability of Maskan Bank Credit Cards: Markov Decision Process

Document Type : applied


1 Assistant Prof. Iran Banking Institute, Central Bank of Iran, Tehran, Iran

2 MSc., Banking, Iran Banking Institute, Central Bank of Iran, Tehran, Iran


Credit card is one of the most profitable instrument in almost every banking system. Indeed, the widely use of credit cards, during the last three decades, among consumers and businessman's is a sign of this claim. Thus, the profitability of credit cards of bank maskan is studied, in this paper. This paper considers an application of Bellman equation in determing the credit card caps. Under a Markov decision process (MDP) setting, the transition matrix are computed and they are used in Bellman equation. The time period of study is the starting day of 2011 to the last day of 2012. To this aim, first, using the Markov chain process, the transition probability matrix of consumers who have credit cards is computed, using their behavior score and after that the added value induced by consumers is calculated. This matrix is useful in determining the optimal policy of credit cards caps. Finally, by using the MDP, a suitable policy is chosen regarding the change of credit cards caps.
JEL: C61; C65
How to cite this paper: Habibi, R., Kouhi, H., & Shamani, M. (2016). Profitability of Maskan Bank Credit Cards: Markov Decision Process. Quarterly Journal of Risk Modeling and Financial Engineering, 1(1), 58–75. (In Persian)


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