Analytics

From Free net encyclopedia

Analytics is the branch of logic dealing with analysis. Business analytics is a term used for more sophisticated forms of business data analysis.

Analytics closely resembles statistical analysis and data mining, but tends to be based on physics modeling involving extensive computation.

[edit]

Example

A common application of business analytics is portfolio analysis. In this, a bank or lending agency has a collection of accounts, some from wealthy people, some from middle class people, and some from poor people. The question is how to evaluate the whole portfolio.

The bank can make money by lending to wealthy people, but there are only so many wealthy people. The bank can make more money by also lending to middle class people. The bank can make even more money by lending to poor people.

Note that poorer people are usually at greater risk of default. Note too, that some poor people are excellent borrowers. Note too, that a few poor people may eventually become rich, and will reward the bank for loyalty.

The bank wants to maximize its income, while minimizing its risk, which makes the portfolio hard to understand.

The analytics solution may combine time series analysis, with many other issues in order to make decisions on when to lend money to these different borrower segments, or decisions on the interest rate charged to members of a portfolio segment to cover any losses among members in that segment.

[edit]