We are delighted to be collaborating with Columbia University in this research effort
San Bruno, CA (PRWEB) August 15, 2009
Nomis Solutions, the leading provider of Pricing and Profitability Management solutions for financial services companies, today announced that Dr. Robert Phillips, Founder and Chief Science Officer and Dr. Robin Raffard, Senior Scientist, have been awarded a research grant from the US Federal Deposit Insurance Corporation to study the effect of loan pricing on adverse selection. The research will be a joint effort between Nomis Solutions and the Columbia University Graduate School of Business where Dr. Phillips serves as Professor of Professional Practice.
"Price-driven adverse selection" refers to the phenomenon that changing the rate offered for a particular type of loan to a population of customers will, all else being equal, also change the loss rate that the lender will experience. In particular, raising the rate of the loan will increase the losses and decreasing the rate will decrease the losses. The underlying reason for this phenomenon is generally believed to be that potential borrowers possess "private information" about their probability of default and that those with higher probability of default are less sensitive to the rate charged for the loan. According to Professor Phillips, "The phenomenon of price-driven adverse selection is widely recognized by lenders, but there is no consistent or widely-accepted model for measuring or predicting it. A better understanding of this phenomenon should help lenders develop better pricing and underwriting policies and should help regulators better understand the risks underlying consumer loan portfolios."
"We are delighted to be collaborating with Columbia University in this research effort," said Frank Rohde, Chief Executive Officer of Nomis Solutions. "Accurate modeling of adverse selection is critical to determining the prices that should be offered for different types of loans and we are always looking to improve our modeling in this area."
Initial results of the research will be presented at an FDIC workshop in December in Washington DC and will be published as an FDIC Working Paper.
About Nomis Solutions
Nomis Solutions enables best-in-class Pricing and Profitability Management for financial services companies. Through a combination of advanced analytics, innovative technology, and tailored business processes, the Pricing and Profitability Management™ Suite delivers quick time-to-benefit, and improves financial and operational performance throughout the customer acquisition and portfolio management processes.
The Pricing and Profitability Management™ Suite of business solutions includes the award-winning Nomis Price Optimizer™, the Nomis Offer Optimizer™, the Nomis Mortgage Portfolio Optimizer™ Suite™, and the Nomis Navigator™. These solutions are designed to meet the specific requirements of auto finance, home equity lending, personal lending, mortgage, and deposits executives. Select customers include Abbey (part of the Santander Group), AmeriCredit, Bank of Montreal, Chase/WaMu, Chrysler Financial, HBOS plc (part of the Lloyds Banking Group), Nationwide Building Society, Royal Bank of Canada, Skipton Building Society and Yorkshire Building Society. Headquartered in San Bruno, CA, Nomis Solutions also has offices in London, United Kingdom. Visit http://www.nomissolutions.com or contact us at 1-650-588-9800 or +44 0207 812 7251.
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