Research

Quantitative Consulting has many interesting research publications. Some of them were completed for the company purposes and others were outcomes of the academic research of our employees. Some of the content is accessible only after registration of your email address, rest of the content is downloadable from this site.

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Support vector machines for credit scoring, Michal Haltuf, 2014

Support vector machines for credit scoring, Michal Haltuf, 2014

credit scoring, logistic regression, peer to peer lending, Support vector machines

Quantitative methods to assess the creditworthiness of the loan applicants are vital for the pro tability and the transparency of the lending business. With the total loan volumes typical for traditional nancial institutions, even the slightest improvement in credit scoring models can translate into substantial additional pro t. Yet for the regulatory reasons and due to the potential model risk, banks tend to be reluctant to replace the logistic regression as an industrial standard with the new algorithms. This does not stop researchers from examining such new approaches, though. This thesis discusses the potential of the support vector machines, to become an alternative to logistic regression in credit scoring. Using
the real-life credit data set obtained from the P2P lending platform Bondora, the scoring models were built to compare the discrimination power of support vector machines against the traditional approach. The results of the comparison were
ambiguous. The linear support vector machines performed worse than logistic regression and their training consumed much more time. On the other hand, support vector machines with non-linear kernel performed better than logistic
regression and the di erence was statistically signi cant at 95% level. Despite this success, several factors prevent SVM from the widespread applications in credit scoring, higher training times and lower robustness of the method being two of the major drawbacks. Considering the alternative algorithms which became available in the last 10 years, support vector machines cannot be recommended
as a standalone method for credit risk models.

24.08.2014

A comparison of logistic regression and decision trees for scoring model design, Ladislav Kesely, 2014 (in Czech)

A comparison of logistic regression and decision trees for scoring model design, Ladislav Kesely, 2014 (in Czech)

logistic regression, scoring model

This master’s thesis presents the comparison of the logistic regression algorithm and the decision tree algorithm regarding creation of the scoring models of financial institutions. The theoretical part of the thesis focuses on the description of both algorithm and their application in model making. The practical part of the thesis uses both algorithms to make models based on a real dataset and then compares which algorithm gives us better results. The thesis is focused on the applied description of the problem, and therefore it does not include precise mathematical definitions.

30.05.2014

Step by Step Credit Risk Model Construction, Michal Rychnovský, 2008 (in Czech)

Step by Step Credit Risk Model Construction, Michal Rychnovský, 2008 (in Czech)

credit risk, logistic regression, scoring models

Step by Step Credit Risk Model Construction. Bachelor thesis, MFF UK. The aim of the present work is to outline a principle of scoring models construction. Describtion of the logistic regression method, its parameters estimation and their significance testing. On the ground of odds ratio variables it defines the Independence model as an estimate of the conditional odds of client’s ability to pay. It generalizes this model by adding individual weights to groups and categories of clients characteristic. Using this way it comes to the WOE model and Full logistic model. This work also studies the way of measuring the diversification power of the models by the Lorenz curve and Somer’s d statistics as an estimate of the Gini coefficient. It applies the described methods to the practical scoring model construction. On a real data there are compared suitability and diversification power of the introduced models.

29.05.2008