Information is very very very important when it comes to credit risk if let’s say um Abigail and Bridget had to come and ask you for a loan and you can only lend it to one of them which one do you lend it to if you only know their names that’s not enough information for you to make a you know a reasonable decision but you might find out that Abigail has got a salary of a hundred grand a day and Bridget earlier has fifty round a day you might say oh well then Abigail might be better however there might be more information and you find out that information is that Abby Abigail’s got expenses of ninety rent whereas Bridget only has expenses of five rent that means this extra additional information has changed your opinion because now we know that Bridget has a disposable income of 45 with which to service the debt and Abigail only has ten but then we also find out that Bridget’s job is ending at the end of the month so this one this 45 here is not sustainable and as you can see is after each piece of information we get it could change our opinion.

However information costs money it costs time it can I mean if I’m Abigail and I have to fill out an entire form from one bank where as in other forms only asking me two questions I’m rather going to go to the question the bank that is only asking me two questions so when it comes to information you have to think of the time the effort the marketability and the cost that that extra information gets so you almost want to try and optimize it so that you get the maximum amount of information to improve your analysis it’s almost like marginal utility each piece of information is not as valuable as the previous one as you get more information it becomes less and less valuable due to your decreasing marginal returns remember that from from good old economics I mean and one other big disadvantage of say this is Abigail and Bridget have perfect information about so let’s say there are five factors okay and you only have a marketing or time to look at three of them.

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