Loan Default Model
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Transcript of Loan Default Model
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Loan Default ModelLoan Default Model
Saed Sayad
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Data Mining Steps
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1. Problem Definition
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Build loan default prediction model for small business using the historical data to assess the likelihood of default by an obligor.
Build loan default prediction model for small business using the historical data to assess the likelihood of default by an obligor.
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Data Mining Team
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Domain Expert
Domain Expert
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2. Data Preparation
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• No of Cases: 35,500 • No of Defaults: 2,500 (7%)• Number of Variables: 25• Total balance for all cases: $554,000,000
• Total balance for defaults: $58,000,000 (10.4%)
• No of Cases: 35,500 • No of Defaults: 2,500 (7%)• Number of Variables: 25• Total balance for all cases: $554,000,000
• Total balance for defaults: $58,000,000 (10.4%)
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3. Data Exploration
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Data Exploration - Univariate
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Months in BusinessMonths in Business
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Data Exploration - Bivariate
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Default%
Months in Business and DefaultMonths in Business and Default
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4. Modeling
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Modeling - Classification
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f
DELQ
Age
Type
Default
Y or NY or N
Logistic RegressionLogistic Regression
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Logistic Regression Model
0
1
Linear Model
Logistic Model
Default
Months in Business
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5. Evaluation
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Evaluation – Variables Contribution
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Evaluation - Confusion Matrix
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Positive CasesPositive Cases Negative CasesNegative Cases
Pred
icte
d Po
sitiv
ePr
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ted
Posi
tive
Pred
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d N
egati
vePr
edic
ted
Neg
ative
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Evaluation – Gain Chart
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Population%
50%10%
100%
100%
58%
10%
Default%
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Return On Investment
• Total Number of Loans = 8,167• Total Number of Defaults = 560• Total Balance for Defaults = $12,281,589 • Top 10% Random– Number of Defaults = 56– Total Balance = $1,230,000
• Top 10% Model– Number of Defaults = 305 – Total Balance = $7,655,772
• Total Number of Loans = 8,167• Total Number of Defaults = 560• Total Balance for Defaults = $12,281,589 • Top 10% Random– Number of Defaults = 56– Total Balance = $1,230,000
• Top 10% Model– Number of Defaults = 305 – Total Balance = $7,655,772
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600% ROI
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6. Deployment
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Questions?