A linear programming alternative to discriminant analysis in credit scoring

William E. Hardy and John L. Adrian
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William E. Hardy: Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama, Postal: Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama
John L. Adrian: Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama, Postal: Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama

Agribusiness, 1985, vol. 1, issue 4, 285-292

Abstract: The typical technique used to construct credit scoring models is discriminant analysis. This paper presents a descriptive example and empirical analysis to illustrate how linear programming might be used to solve discriminant type problems. Results of the analysis indicated that the linear programming procedure performs well in solving the example credit scoring problem. In addition, the structure of the linear programming model was such that changes could be readily made to reflect either conservative or liberal lending policies.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:1:y:1985:i:4:p:285-292

DOI: 10.1002/1520-6297(198524)1:4<285::AID-AGR2720010406>3.0.CO;2-M

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