Intelligent credit scoring : building and implementing better credit risk scorecards / Naeem Siddiqi.

Format:

Book

Author/Creator:

Ṣiddīqī, Naʻīm, author.

Series:

Wiley and SAS business series.

Wiley and SAS Business Series

Language:

English

Subjects (All):

Credit scoring systems.

Physical Description:

1 online resource (459 pages) : illustrations (some color), tables.

Edition:

Second edition.

Place of Publication:

Hoboken, New Jersey : Wiley, 2017.

Summary:

Intelligent Credit Scoring presents a business-oriented process for the development and implementation of risk prediction scorecards. The credit scorecard is a powerful tool for measuring the risk of individual borrowers, gauging overall risk exposure and developing analytically driven, risk-adjusted strategies for existing customers. In the past 10 years, hundreds of banks worldwide have brought the process of developing credit scoring models in-house, while 'credit scores' have become a frequent topic of conversation in many countries where bureau scores are used broadly. In the United States, the 'FICO' and 'Vantage' scores continue to be discussed by borrowers hoping to get a better deal from the banks. While knowledge of the statistical processes around building credit scorecards is common, the business context and intelligence that allows you to build better, more robust, and ultimately more intelligent, scorecards is not. As the follow-up to Credit Risk Scorecards, this updated second edition includes new detailed examples, new real-world stories, new diagrams, deeper discussion on topics including WOE curves, the latest trends that expand scorecard functionality and new in-depth analyses in every chapter. Expanded coverage includes new chapters on defining infrastructure for in-house credit scoring, validation, governance, and Big Data.-- Provided by Publisher.

Contents:

Cover

Title Page

Copyright

Contents

Acknowledgments

Chapter 1 Introduction

Scorecards: General Overview

Notes

Chapter 2 Scorecard Development: The People and the Process

Scorecard Development Roles

Scorecard Developer

Data Scientist

Product or Portfolio Risk Manager/Credit Scoring Manager

Product Manager(s)

Operational Manager(s)

Model Validation/Vetting Staff

Project Manager

IT/IS Managers

Enterprise Risk/Corporate Risk Management Staff (Where Applicable)

Legal Staff/Compliance Manager

Intelligent Scorecard Development

Scorecard Development and Implementation Process: Overview

Chapter 3 Designing the Infrastructure for Scorecard Development

Data Gathering and Organization

Creation of Modeling Data Sets

Data Mining/Scorecard Development

Validation/Backtesting

Model Implementation

Reporting and Analytics

Note

Chapter 4 Scorecard Development Process, Stage 1: Preliminaries and Planning

Create Business Plan

Identify Organizational Objectives and Scorecard Role

Internal versus External Development and Scorecard Type

Create Project Plan

Identify Project Risks

Identify Project Team

Why "Scorecard" Format?

Chapter 5 Managing the Risks of In-House Scorecard Development

Human Resource Risk

Technology and Knowledge Stagnation Risk

Chapter 6 Scorecard Development Process, Stage 2: Data Review and Project Parameters

Data Availability and Quality Review

Data Gathering for Definition of Project Parameters

Definition of Project Parameters

Exclusions

Performance and Sample Windows and Bad Definition

Effects of Seasonality

Definition of Bad

Dealing with Low-Default Portfolios

Confirming the Bad Definition

Good and Indeterminate

Segmentation

Experience-Based (Heuristic) Segmentation.

Statistically Based Segmentation

Comparing Improvement

Choosing Segments

Methodology

Review of Implementation Plan

Chapter 7 Default Definition under Basel

Introduction

Default Event

Prediction Horizon and Default Rate

Validation of Default Rate and Recalibration

Application Scoring and Basel II

Summary

Chapter 8 Scorecard Development Process, Stage 3: Development Database Creation

Development Sample Specification

Selection of Characteristics

Sampling

Development/Validation

Good/Bad/Reject

Development Data Collection and Construction

Random and Representative

Nonsegmented Data Set

Data Quirks

Adjusting for Prior Probabilities

Offset Method

Sampling Weights

Chapter 9 Big Data: Emerging Technology for Today's Credit Analyst

The Four V's of Big Data for Credit Scoring

Volume

Velocity

Variety

Value

Credit Scoring and the Data Collection Process

Credit Scoring in the Era of Big Data

The Promise of Big Data for Banks

Population versus Sample in the World of Big Data

Ethical Considerations of Credit Scoring in the Era of Big Data

The Rise of "Big Brother" Issues When Using Big Data

Conclusion

Chapter 10 Scorecard Development Process, Stage 4: Scorecard Development

Explore Data

Missing Values and Outliers

Correlation

Initial Characteristic Analysis

Statistical Measures

Logical Trend

Business/Operational Considerations

Preliminary Scorecard

Risk Profile Concept

Logistic Regression

Designing a Scorecard

Reject Inference

Reasons for Reject Inference

Reject Inference Techniques

Verification

Final Scorecard Production

Scaling

Points Allocation

Choosing a Scorecard

Misclassification

Scorecard Strength

Validation

Notes.

Chapter 11 Scorecard Development Process, Stage 5: Scorecard Management Reports

Gains Table

Characteristic Reports

Chapter 12 Scorecard Development Process, Stage 6: Scorecard Implementation

Pre-implementation Validation

System Stability Report

Characteristic Analysis Report

What if the Scorecard Does Not Validate?

Strategy Development

General Considerations

Scoring Strategy

Setting Cutoffs

Strategy Development Communication

Risk-Adjusted Actions

Policy Rules

Overrides

Chapter 13 Validating Generic Vendor Scorecards

Vendor Management Considerations

Vendor Model Purpose

Target Population

Target Definition

Sample Selection

Model Estimation Methodology

Transparency of Vendor Model Estimation

Factor Selection

Validation Assessment

Vendor Model Implementation and Deployment

Considerations for Ongoing Monitoring

Examples of Vendor Disclosure Challenges

Monitoring in Conjunction with Another Score

Ongoing Quality Assurance of the Vendor

Get Involved

Appendix: Key Considerations for Vendor Scorecard Validations

Chapter 14 Scorecard Development Process, Stage 7: Post-implementation

Scorecard and Portfolio Monitoring Reports

Credit Application Analysis Reports

Reacting to Changes

Portfolio Performance Reports

Review

Appendix A: Common Variables Used in Credit Scoring

Appendix B: End-to-End Example of Scorecard Creation

Bibliography

About the Author

About the Contributing Authors

Index

EULA.

Notes:

Includes bibliographical references and index.

Description based on online resource; title from PDF title page (Ebrary, viewed January 4, 2017).

ISBN:

9781119282334

1119282330

9781119282297

1119282292

9781119282396

111928239X

OCLC:

967587893