Day One - Credit scoring models in the Retail segment

Model development

  • Two types of models («application scoring» and «behavioural scoring»)
  • Types of variables (statistical and business classification of candidate variables)
  • Preparation of data (from cleaning and filtering data to the preparation, the so-called "modelling sample")
  • Theoretically available and practically tested methods of making models (from decision trees, neural networks, to logistic regression and the development of "scorecards")
  • Selection of variables (different measures of predictability of candidate variables)
  • Statistical measures of performance (from the discriminatory power to the overall accuracy of the model)

Model calibration

  • "Product-" and "client-based" models
  • Determination of "cut-off score" (from the statistical background to the search for balance between protection and result)
  • Combining application and behavioural components (how to get the overall credit score)
  • Credit rating in Retail?

Initial model validation

  • Data validation
  • Quantitative validation
  • Qualitative validation

Implementing the model in the loan approval process

  • "Work-flow" of loan approval (key elements)
  • "Credit scoring" models and loan application processing system (APS)
  • Technical and user testing of the system

Follow-up model validation and model performance management

  • Out-of-time validation and the champion-challenger method
  • "Life cycle" model of credit quality in the Retail segment

A practical example of the described phases in SAS software

Day Two - Credit rating models in SME/Corporate segment

Model development and calibration

  • Typical model components in SME/Corporate segment (financial "scorecard", "soft facts" correction, behavioural model correction)
  • Types of variables (classification according to the creation method and financial classification of candidate variables)
  • Preparation of data (calculation of financial indicators and initial exploratory analysis, creation of "modelling sample")
  • Development of models (selection of variables - the balance between statistical measures and economic significance)
  • Calibration of rating models (from financial score to final rating)

Initial model validation

  • Specifics of all types of validation in SME/Corporate segment

Implementing the model in the loan approval process

  • Key elements of loan approval "work-flow" – Specifics in SME/Corporate segment
  • Limits of standardization of loan approval processes in the domain of legal entities
  • Internal measures of credit worthiness of clients and the system for loan application by business entities
  • Technical and user testing of the loan approval system

Follow-up model validation and model performance management

  • Out-of-time validation and the champion-challenger method
  • Guidelines for model management in SME/Corporate segment

A practical example of the described phases in SAS software

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