Application scoring: logit model approach and the divergence method compared

Izabela Majer ()
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Izabela Majer: Warsaw School of Economics

No 17, Working Papers from Department of Applied Econometrics, Warsaw School of Economics

Abstract: This study presents the example of application scoring. Two methods are considered: logit model approach and the divergence method. The practical example uses contemporary data on loan applications from the Polish bank. The constructed scoring models are validated on the hold-out sample. Both types of models seem to be acceptable and have high discriminatory power. The prediction accuracy measures indicate that the scoring based on divergence method is better than the one founded on logit model approach.

Keywords: credit scoring; logit model; divergence method; credit risk; classification (search for similar items in EconPapers)
JEL-codes: C10 G21 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006-05-22
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