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http://hdl.handle.net/2451/26272
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| Title: | 'A Statistical Model for Credit Scoring' |
| Authors: | Greene, William H. |
| Issue Date: | 8-Apr-1992 |
| Series/Report no.: | EC-92-29 |
| Abstract: | We derive a model for consumer loan default and credit card expenditure.
The default model is based on statistical models for discrete choice, in
contrast to the usual procedure of linear discriminant analysis. The
model is then extended to incorporate the default probability in a model
of expected profit. The technique is applied to a large sample of
applications and expenditure from a major credit card company. The
nature of the data mandates the use of models of sample selection for
estimation. The empirical model for expected profit produces an optimal
acceptance rate for card applications which is far higher than the
observed rate used by the credit card vendor based on the discriminant
analysis. I am grateful to Terry Seaks for valuable comments on an
earlier draft of this paper and to Jingbin Cao for his able research
assistance. The provider of the data and support for this project has
requested anonymity, so I must thank them as such. Their help and
support are gratefully acknowledged. Participants in the applied
econometrics workshop at New York University also provided useful commentary. |
| URI: | http://hdl.handle.net/2451/26272 |
| Appears in Collections: | Economics Working Papers
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