Analytic Models of the ROC Curve: Applications to Credit Rating Model Validation
33 Pages Posted: 1 Mar 2007
Date Written: January 20, 2007
In this paper, the authors use the concept of the population Receiver Operating Characteristic (ROC) curve to build analytic models of ROC curves. Information about the population properties can be used to gain greater accuracy of estimation relative to the non-parametric methods currently in vogue. If used properly, this is particularly helpful in some situations where the number of sick loans is rather small, a situation frequently met in practice and in periods of benign macro-economic background.
Keywords: Validation, Credit Analysis, Rating Models, ROC, Basel II
JEL Classification: C43, G20, G38
Suggested Citation: Suggested Citation