Credit Scoring Modelling for Retail Banking Sector .pptVIP

Universidad Complutense de Madrid Credit Scoring Modelling for Retail Banking Sector Problem raised by Accenture. Coordinators: Ignacio Villanueva (UCM). Estela Luna (Accenture). Credit Scoring Modelling for Retail Banking Sector Team members: Elena Bartolozzi (Universitá di Firenze) Matthew Cornford (University of Oxford) Leticia García-Ergüín (UCM) Cristina Pascual Deocón (UCM) Oscar Iván Pascual (UCM) Francisco Javier Plaza (UCM) Credit Scoring Modelling for Retail Banking Sector Credit Scoring Modelling for Retail Banking Sector Credit Scoring Modelling for Retail Banking Sector Our problem is concerned with who a bank should loan its money to. When a client applies for a loan, the bank would like to be sure that the client will pay back the full amount of the loan. We need effective models that allow us to predict if a client will pay back the loan. What we have is historical data for several variables. We are trying to fit a model to this historical data so we can estimate a probability of default. Credit Scoring Modelling for Retail Banking Sector Credit Scoring Modelling for Retail Banking Sector Our data is provided by Accenture and include details of completed loan agreements The variables included are: Age Income Wealth Marital Status Length as a Client Amount of Loan Maturity Default Credit Scoring Modelling for Retail Banking Sector Sample Selection We split the sample into two parts The modelling sample The validation sample Credit Scoring Modelling for Retail Banking Sector Modelling Sample A random sample from the data is selected. The size of the modelling sample is about 2/3 of the original data This new sample is used to create the model. Validation Sample The remaining data is used to validate the model We test how many defaults the model predicted and which of them really did default. Credit Scoring Modelling for Retail Banking Sector Credit Scoring Modelling for Retail Banking Sector We have a dependent variable, which