Credit Risk Scoring with Bayesian Network Models

Research output: Journal PublicationArticlepeer-review

29 Citations (Scopus)

Abstract

This paper proposes a Bayesian network model to address censoring, class imbalance and real-time implementation issues in credit risk scoring. It shows that the Bayesian network model performs well against competing models (logistic regression model and neural network model) along several dimensions such as accuracy, sensitivity, precision and the receiver characteristic curve. Better performance of the Bayesian network model is particularly salient with class imbalance, higher dimensions and a rejection sample. Furthermore, the Bayesian network model can be scaled efficiently when implemented onto a larger dataset, thus making it amenable for real-time implementation.

Original languageEnglish
Pages (from-to)423-446
Number of pages24
JournalComputational Economics
Volume47
Issue number3
DOIs
Publication statusPublished - 1 Mar 2016

Keywords

  • Bayesian network
  • Censoring
  • Class imbalance
  • Credit scoring
  • Real time scoring

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Computer Science Applications

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