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Analytic models of the receiver operating characteristic curve: Applications to credit rating model validation

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  • Satchell, Steve
  • Xia, Wei

Abstract

In this paper, the authors use the concept of the population receiver operating characteristic (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 practice and in periods of benign macroeconomic background.

Suggested Citation

  • Satchell, Steve & Xia, Wei, 2007. "Analytic models of the receiver operating characteristic curve: Applications to credit rating model validation," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 1(1), pages 90-106, December.
    • Handle: RePEc:aza:rmfi00:y:2007:v:1:i:1:p:90-106
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    Citations

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    Cited by:

    1. Haselmann, Rainer & Singla, Shikhar & Vig, Vikrant, 2022. "Supranational supervision," LawFin Working Paper Series 50, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    2. Haselmann, Rainer & Singla, Shikhar & Vig, Vikrant, 2022. "Supranational supervision," LawFin Working Paper Series 46, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).

    More about this item

    Keywords

    validation; credit analysis; rating models; ROC; Basel II;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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