Approaches for credit scorecard calibration: An empirical analysis

Financial institutions use credit scorecards for risk management. A scorecard is a data-driven model for predicting default probabilities. Scorecard assessment concentrates on how well a scorecard discriminates good and bad risk. Whether predicted and observed default probabilities agree (i.e., calibration) is an equally important yet often overlooked dimension of scorecard performance. Surprisingly, no attempt has been made to systematically...