Default predictors and credit scoring models for retail banking

0334201 - NHU-C 2010 DE eng O - Others
Kočenda, Evžen - Vojtek, Martin
Default predictors and credit scoring models for retail banking.
2009
R&D Projects: GA ČR GA402/09/1595; GA ČR GA402/05/0931
Institutional research plan: CEZ:MSM0021620846
Keywords : credit scoring * discrimination analysis * banking sector * retail loans
Subject RIV: AH - Economics

This paper develops a specification of the credit scoring model with high discriminatory power to analyze data on loans at the banking market. Parametric and non- parametric approaches are employed to produce three models using logistic regression (parametric) and one model using Classification and Regression Trees (CART, nonparametric). The models are compared in terms of efficiency and power to discriminate between low and high risk clients by employing data from a new European Union economy. We are able to detect the most important characteristics of default behavior: the amount of resources the client has, the level of education, marital status, the purpose of the loan, and the number of years the client has had an account with the bank. Both methods are robust: they found similar variables as determinants.
Permanent Link: http://hdl.handle.net/11104/0178997