Download Boosting Portfolio Yield by Controlling Skip Tracing Cost

Statistics & Researc h
Boosting Portrolio Yield by Controlling Skip Tracing Cost
Stephen Williams
MDG Capital Irvine CA
(The full paper had not been received at the time of the printing of the proceedings.)
Abstract
Statement of the Situation
The yield from a receivables portfolio can
deteriorate seriously due to the cost of skip
tracing on past due accounts. The two major
variable costs associated with recoveries are data
costs and labor costs, with labor being at least
75% of the total skip tracing costs.
Solution
We have developed a series of scoring models
that predict the probability of locating a skipped
debtor and the probability of recovering on the
debt. The data necessary for scoring the debt is
located in a number of databases. No one
database was sufficient to make a g.xxi
prediction.
Methodology
No single model could be used to predict either
locatability or recovery probability. Cluster
analysis was used to define sub-populations that
could be modeled further. Sub-populations were
defined according to the type of data and
amount of data available. Models were
constructed using both linear and non-linear
regression.
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