EMP (version 1.0.2)

EMP_CS: EMP_CS

Description

Estimates the EMP for credit scoring, considering constant ROI and a bimodal LGD function with point masses p0 and p1 for no loss and total loss, respectively.

Usage

EMP_CS(ROC, p0 = 0.55, p1 = 0.1, ROI = 0.2644)

Arguments

ROC

A ROC object, output of calcROC().

p0

Percentage of cases on the first point mass of the LGD distribution (complete recovery).

p1

Percentage of cases on the second point mass of the LGD distribution (complete loss).

ROI

Constant ROI per granted loan. A percentage.

Value

• An EMP object with two components.
• EMP
  The Expected Maximum Profit of the ROC curve at EMPfrac cutoff.
• EMPfrac
  The percentage of cases that should be excluded, that is, the percentual cutoff at EMP profit.

References

Verbraken, T., Bravo, C., Weber, R. and Baesens, B. (2014). Development and application of consumer credit scoring models using profit-based classification measures. European Journal of Operational Research. 238 (2): 505-513. Available Online: http://www.sciencedirect.com/science/article/pii/S0377221714003105

See Also

See Also calcROC.

Examples

# Dummy dataset.
score.ex <- runif(1000, 0, 1)
class.ex <- lapply(score.ex, function(x){rbinom(1,1,x)})
class.ex <- unlist(class.ex)

# Calculate ROC curve.
ROC.ex <- calcROC(score.ex, class.ex)

# Estimates EMP with point masses in 0.1 and 0.9, and 0.1 ROI
EMP.ex <- EMP_CS(ROC.ex, 0.1, 0.1, 0.1)
EMP.ex