Analytic Models of the ROC Curve: Applications to Credit Rating Model Validation

Stephen Satchel and Wei Xia
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Wei Xia: Birbeck College, University of London

No 181, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: In this paper, the authors use the concept of the population 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 periods of benign macro-economic background.

Keywords: validation; credit analysis; rating model; ROC; Basel II (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-08-01
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
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Citations: View citations in EconPapers (14)

Published as: Satchel, S. and Xia, W, 2008, "Analytic Models of the ROC Curve: Applications to Credit Rating Model Validation", In G. Christodoulakis and S. Satchell (Ed), The Analytics of Risk Model Validation, 113–133, Academic Press.

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