Data Intelligence, Business Analytics
Hi.. i'm new in analytic field & trying to learn building Credit risk modeling on my own & facing few difficulties(As I don't know how risk modeling actually gets implemented in Banking system) After reading few thesis papers & information available on internet i developed some understanding of credit risk modeling(PD) & thus prepared steps that needs to be taken while developing risk modeling which is as below:(Logistic Regression)
1. Definition of Bad:
Bankruptcy process already started or payment due for more than 90 days(basel-2)
PD=Max prob of default estimated by experts through analyzing previous years data
Del PD= PD error
-replace all variable having z score > 3 by mean + 3* S.D(Proc Standard)
- replace all variable having z score <- 3 by mean - 3* S.D
-How to decide number of group (Expert judgement?) & how grouping can be done
3. Analysis of Variables choosing statistical model form & calculation of coefficients
A. Expert judgements
B.Economic logic, discriminatory power of variables (& other criteria needs to be considered
- Cramer’s V,chi sq
- Based on percentile/Attributes (I’m confused with SAS code for the same though I know pctlpts can be used for calculating percentile but do we need to specify each & every variables...Really confused with this...in some paper it was mentioned that grouping should be done based upon WOE...
- Code the values-apply weight of evidence(WOE)
- Calculate Information Value
C. Applying forward selection (Mostly used)
4.Validation of Model
- Ginni coefficient
- Lorenz curve
- KS distance
5.Implementing score Card Scaling
- Score=offset + factor*ln(odds)Score + PDO(Points to double the odd)
If possible please help me out as i don't have any contacts in Analytic field who can guide me..or please suggest me some really good stuff so that i learn read & learn on my own..
Here are a couple of books that give a good overview of consumer credit risk modeling (with emphasis on scorecards.) They are both fairly quick reads, and should be fairly inexpensive.
Credit Scoring for Risk Managers, The Handbook for Lenders - Elizabeth Mays
Credit Risk Scorecards - Naeem Siddiqi
These are not highly technical, so you would have to look elsewhere for advanced model diagnostics, etc. These do not focus on the Basel (PD, LGD, EAD) framework, and they are not really applicable to corporate/government credit risk.
Hope they help...
yesterday only i got Naeem Siddiqi..will get back to you once i finished reading it...:)
Thanks & Regards