|
|
|
|
||||
|
||||
Economic Benefit of Powerful Credit ScoringAndreas BloechlingerZurich Cantonal Bank; University of St. Gallen Markus LeippoldUniversity of Zurich - Department of Banking and Finance; Swiss Finance Institute; University of Zurich - Faculty of Economics, Business Administration and Information Technology January 2005 Abstract: In this paper, we study the economic benefits from using credit scoring models. We contribute to the literature by relating the discriminatory power of a credit scoring model to the optimal credit decision. Given the Receiver Operating Characteristic (ROC) curve of the credit scoring model, we derive a) the profit-maximizing cuttoff regime and b) the pricing curve. In addition, we study a stylized loan market model with banks that differ in the quality of their credit scoring model. We find that profitability varies substantially among lenders. More powerful credit scoring models lead to economically significant differences in credit portfolio performance.
Number of Pages in PDF File: 42 Keywords: Bank loan pricing, credit scoring, discriminatory power, Receiver Operating Characteristic (ROC) JEL Classification: D40, G21, H81 working papers seriesDate posted: January 31, 2005Suggested CitationContact Information
|
|
||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo8 in 0.360 seconds
