Examples of Overfitting Encountered When Building Private Firm Default Prediction Models

Topics:
Commercial Lending
Tags:
Credit Risk Management,
Financial Services
Source:
Donald R. Frey & Co.

FREE Registration is required

Overview: The key to building default prediction models, if they are to be incorporated into credit risk management systems, is to build the most powerful model possible subject to the constraints that it is transparent, usable, and intuitive. In this process, we must constantly be on guard for whether or not we have overfit the data. This paper presents two examples of overfitting that is encountered while building private firm models. These issues, if not detected, can reduce the usability of the model and overstated the true predictive power of the model in real credit decision-making.

(Is this item miscategorized? Does it need more tags? Let us know.)

Format: PDF | Size: 246KB | Date: Apr 2005 | Pages: 14

People who downloaded this item also downloaded

White Paper Effective Credit Risk Management
White Paper Heating, Ventilating and Air Conditioning (HVAC) Controls
White Paper Internal Ratings-Based Systems for Corporate Credit and Operational Risk Advanced Measurement Approaches for Regulatory Capital; Proposed Rule and Notice
White Paper Benchmarking: The First Step In Reducing Utility Costs
White Paper The Enron Affair From A Lender’s View

Top results from Commercial Lending

White Paper Does Bank Lending Affect Output? Evidence from the U.S. States
White Paper What Did the Credit Market Expect of Argentina Default? Evidence from Default Swap Data
White Paper New Evidence on the Interest Rate Effects of Budget Deficits and Debt
White Paper Consumption, Debt and Portfolio Choice: Testing the Effect of Bankruptcy Law
White Paper Small Business Loan Turndowns, Personal Wealth and Discrimination

» View all Commercial Lending listings

advertisement
advertisement
  • Click Here
  • Click Here
  • Click Here
advertisement

Returning users: Log In Here!

Already registered on BNET, TechRepublic, or ZDNet? Simply log in.

Free Membership: Sign Up Now!

Sign up for a free membership today and get instant and unlimited access to one of the largest databases of white papers, webcasts, and casestudies anywhere. Your FREE membership allows you to:

  • Download an unlimited amount of content, including classic and current white papers, case studies, webcasts and more
  • Track content on your chosen topics of interest
  • Receive targeted email alerts when your favorite content is added
  • Save content for future reading
  • Receive our member newsletter

When you register to access this directory, you become a member of BNET. In addition, you allow us to share your information with companies that produce products or services featured in the library--so that such companies may contact you with information and offers regarding their products and services. This enables us to keep the library a free service. As a directory registrant, you will receive a complimentary subscription to the BNET member newsletter, The BNET Report. You can unsubscribe from this newsletter at any time. By clicking the Sign up button, you indicate that you agree to our Terms and Conditions and have read and understand our Privacy Policy (updated).