Universiti Teknologi Malaysia Institutional Repository

Applying game theory to mortgage framework

Abu Hasan, Abdul Shukur and Mohd. Azmi, Nurulhuda Firdaus and Sjarif, Nilam Nur Amir and Md. Sarkan, Haslina and Yahya, Yazriwati and Ya'acob, Suraya (2020) Applying game theory to mortgage framework. In: 2nd Joint Conference on Green Engineering Technology and Applied Computing 2020, IConGETech 2020 and International Conference on Applied Computing 2020, ICAC 2020, 4 February 2020 - 5 February 2020, Bangkok, Thailand.


Official URL: http://dx.doi.org/10.1088/1757-899X/864/1/012075


To some, the retail banking market is considered an oligopoly. This is not healthy for a country's economy and its people because it is important for competition to thrive in the banking industry. Any form of market failure or anti-competitive behaviour affects productive efficiency, consumer welfare and economic growth. With the introduction of the Base Rate (BR) to replace the Base Lending Rate (BLR), Bank Negara Malaysia (BNM) seeks to inject transparency into the mortgage framework. Under this system, banks will have to disclose their margins and are not allowed to loan below the BR just to attract customers and boost loan growth. This new framework will allow customers to make better financial decisions whilst having little impact on borrowers. Even though this only applies to personal home loans, it still poses a challenge to competing banks. Those with a seemingly strong niche in consumer financing will be able to offer more attractive and competitive BR leading to better Effective Lending Rates (ELR). This paper proposes using Game Theory (GT) as a method to predict probable outcomes in strategic interactions for BR revision. Monte Carlo Simulation (MCS) will then provide a means of weighing the probabilities of the contributing factors. With the ability to anticipate the competition's next moves in a quantifiable manner, strategists will be better prepared in understanding and navigating the complex banking system.

Item Type:Conference or Workshop Item (Paper)
Uncontrolled Keywords:mortgage framework, competition, consumer
Subjects:Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Divisions:Razak School of Engineering and Advanced Technology
ID Code:92438
Deposited By: Yanti Mohd Shah
Deposited On:28 Sep 2021 15:44
Last Modified:28 Sep 2021 15:44

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