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probdefault

Likelihood of default for given data set

Syntax

pd = probdefault(sc)
pd = probdefault(sc,data)

Description

example

pd = probdefault(sc) computes the probability of default for sc, the data used to build the creditscorecard object.

example

pd = probdefault(sc,data) computes the probability of default for a given data set specified using the optional argument data.

By default, the data used to build the creditscorecard object are used. You can also supply input data, to which the same computation of probability of default is applied.

Examples

collapse all

Create a creditscorecard object using the CreditCardData.mat file to load the data (using a dataset from Refaat 2011).

load CreditCardData
sc = creditscorecard(data,'IDVar','CustID')
sc = 
  creditscorecard with properties:

                GoodLabel: 0
              ResponseVar: 'status'
               WeightsVar: ''
                 VarNames: {1x11 cell}
        NumericPredictors: {1x6 cell}
    CategoricalPredictors: {'ResStatus'  'EmpStatus'  'OtherCC'}
           BinMissingData: 0
                    IDVar: 'CustID'
            PredictorVars: {1x9 cell}
                     Data: [1200x11 table]

Perform automatic binning using the default options. By default, autobinning uses the Monotone algorithm.

sc = autobinning(sc);

Fit the model.

sc = fitmodel(sc);
1. Adding CustIncome, Deviance = 1490.8527, Chi2Stat = 32.588614, PValue = 1.1387992e-08
2. Adding TmWBank, Deviance = 1467.1415, Chi2Stat = 23.711203, PValue = 1.1192909e-06
3. Adding AMBalance, Deviance = 1455.5715, Chi2Stat = 11.569967, PValue = 0.00067025601
4. Adding EmpStatus, Deviance = 1447.3451, Chi2Stat = 8.2264038, PValue = 0.0041285257
5. Adding CustAge, Deviance = 1441.994, Chi2Stat = 5.3511754, PValue = 0.020708306
6. Adding ResStatus, Deviance = 1437.8756, Chi2Stat = 4.118404, PValue = 0.042419078
7. Adding OtherCC, Deviance = 1433.707, Chi2Stat = 4.1686018, PValue = 0.041179769

Generalized linear regression model:
    status ~ [Linear formula with 8 terms in 7 predictors]
    Distribution = Binomial

Estimated Coefficients:
                   Estimate       SE       tStat       pValue  
                   ________    ________    ______    __________

    (Intercept)    0.70239     0.064001    10.975    5.0538e-28
    CustAge        0.60833      0.24932      2.44      0.014687
    ResStatus        1.377      0.65272    2.1097      0.034888
    EmpStatus      0.88565        0.293    3.0227     0.0025055
    CustIncome     0.70164      0.21844    3.2121     0.0013179
    TmWBank         1.1074      0.23271    4.7589    1.9464e-06
    OtherCC         1.0883      0.52912    2.0569      0.039696
    AMBalance        1.045      0.32214    3.2439     0.0011792


1200 observations, 1192 error degrees of freedom
Dispersion: 1
Chi^2-statistic vs. constant model: 89.7, p-value = 1.4e-16

Compute the probability of default.

pd = probdefault(sc);
disp(pd(1:15,:))
    0.2503
    0.1878
    0.3173
    0.1711
    0.1895
    0.1307
    0.5218
    0.2848
    0.2612
    0.3047
    0.3418
    0.2237
    0.2793
    0.3615
    0.1653

This example describes both the assignment of points for missing data when the 'BinMissingData' option is set to true, and the corresponding computation of probabilities of default.

  • Predictors that have missing data in the training set have an explicit bin for <missing> with corresponding points in the final scorecard. These points are computed from the Weight-of-Evidence (WOE) value for the <missing> bin and the logistic model coefficients. For scoring purposes, these points are assigned to missing values and to out-of-range values, and the final score is mapped to a probability of default when using probdefault.

  • Predictors with no missing data in the training set have no <missing> bin, therefore no WOE can be estimated from the training data. By default, the points for missing and out-of-range values are set to NaN, and this leads to a score of NaN when running score. For predictors that have no explicit <missing> bin, use the name-value argument 'Missing' in formatpoints to indicate how missing data should be treated for scoring purposes. The final score is then mapped to a probability of default when using probdefault.

Create a creditscorecard object using the CreditCardData.mat file to load the dataMissing with missing values.

load CreditCardData.mat 
head(dataMissing,5)
ans=5×11 table
    CustID    CustAge    TmAtAddress     ResStatus     EmpStatus    CustIncome    TmWBank    OtherCC    AMBalance    UtilRate    status
    ______    _______    ___________    ___________    _________    __________    _______    _______    _________    ________    ______

      1          53          62         <undefined>    Unknown        50000         55         Yes       1055.9        0.22        0   
      2          61          22         Home Owner     Employed       52000         25         Yes       1161.6        0.24        0   
      3          47          30         Tenant         Employed       37000         61         No        877.23        0.29        0   
      4         NaN          75         Home Owner     Employed       53000         20         Yes       157.37        0.08        0   
      5          68          56         Home Owner     Employed       53000         14         Yes       561.84        0.11        0   

Use creditscorecard with the name-value argument 'BinMissingData' set to true to bin the missing numeric or categorical data in a separate bin. Apply automatic binning.

sc = creditscorecard(dataMissing,'IDVar','CustID','BinMissingData',true);
sc = autobinning(sc);

disp(sc)
  creditscorecard with properties:

                GoodLabel: 0
              ResponseVar: 'status'
               WeightsVar: ''
                 VarNames: {1x11 cell}
        NumericPredictors: {1x6 cell}
    CategoricalPredictors: {'ResStatus'  'EmpStatus'  'OtherCC'}
           BinMissingData: 1
                    IDVar: 'CustID'
            PredictorVars: {1x9 cell}
                     Data: [1200x11 table]

Set a minimum value of 0 for CustAge and CustIncome. With this, any negative age or income information becomes invalid or "out-of-range". For scoring and probability of default computations, out-of-range values are given the same points as missing values.

sc = modifybins(sc,'CustAge','MinValue',0);
sc = modifybins(sc,'CustIncome','MinValue',0);

Display bin information for numeric data for 'CustAge' that includes missing data in a separate bin labelled <missing>.

bi = bininfo(sc,'CustAge');
disp(bi)
        Bin        Good    Bad     Odds       WOE       InfoValue 
    ___________    ____    ___    ______    ________    __________

    '[0,33)'        69      52    1.3269    -0.42156      0.018993
    '[33,37)'       63      45       1.4    -0.36795      0.012839
    '[37,40)'       72      47    1.5319     -0.2779     0.0079824
    '[40,46)'      172      89    1.9326    -0.04556     0.0004549
    '[46,48)'       59      25      2.36     0.15424     0.0016199
    '[48,51)'       99      41    2.4146     0.17713     0.0035449
    '[51,58)'      157      62    2.5323     0.22469     0.0088407
    '[58,Inf]'      93      25      3.72     0.60931      0.032198
    '<missing>'     19      11    1.7273    -0.15787    0.00063885
    'Totals'       803     397    2.0227         NaN      0.087112

Display bin information for categorical data for 'ResStatus' that includes missing data in a separate bin labelled <missing>.

bi = bininfo(sc,'ResStatus');
disp(bi)
        Bin         Good    Bad     Odds        WOE       InfoValue 
    ____________    ____    ___    ______    _________    __________

    'Tenant'        296     161    1.8385    -0.095463     0.0035249
    'Home Owner'    352     171    2.0585     0.017549    0.00013382
    'Other'         128      52    2.4615      0.19637     0.0055808
    '<missing>'      27      13    2.0769     0.026469    2.3248e-05
    'Totals'        803     397    2.0227          NaN     0.0092627

For the 'CustAge' and 'ResStatus' predictors, there is missing data (NaNs and <undefined>) in the training data, and the binning process estimates a WOE value of -0.15787 and 0.026469 respectively for missing data in these predictors, as shown above.

For EmpStatus and CustIncome there is no explicit bin for missing values because the training data has no missing values for these predictors.

bi = bininfo(sc,'EmpStatus');
disp(bi)
       Bin        Good    Bad     Odds       WOE       InfoValue
    __________    ____    ___    ______    ________    _________

    'Unknown'     396     239    1.6569    -0.19947    0.021715 
    'Employed'    407     158    2.5759      0.2418    0.026323 
    'Totals'      803     397    2.0227         NaN    0.048038 
bi = bininfo(sc,'CustIncome');
disp(bi)
          Bin          Good    Bad     Odds         WOE       InfoValue 
    _______________    ____    ___    _______    _________    __________

    '[0,29000)'         53      58    0.91379     -0.79457       0.06364
    '[29000,33000)'     74      49     1.5102     -0.29217     0.0091366
    '[33000,35000)'     68      36     1.8889     -0.06843    0.00041042
    '[35000,40000)'    193      98     1.9694    -0.026696    0.00017359
    '[40000,42000)'     68      34          2    -0.011271    1.0819e-05
    '[42000,47000)'    164      66     2.4848      0.20579     0.0078175
    '[47000,Inf]'      183      56     3.2679      0.47972      0.041657
    'Totals'           803     397     2.0227          NaN       0.12285

Use fitmodel to fit a logistic regression model using Weight of Evidence (WOE) data. fitmodel internally transforms all the predictor variables into WOE values, using the bins found with the automatic binning process. fitmodel then fits a logistic regression model using a stepwise method (by default). For predictors that have missing data, there is an explicit <missing> bin, with a corresponding WOE value computed from the data. When using fitmodel, the corresponding WOE value for the <missing> bin is applied when performing the WOE transformation.

[sc,mdl] = fitmodel(sc);
1. Adding CustIncome, Deviance = 1490.8527, Chi2Stat = 32.588614, PValue = 1.1387992e-08
2. Adding TmWBank, Deviance = 1467.1415, Chi2Stat = 23.711203, PValue = 1.1192909e-06
3. Adding AMBalance, Deviance = 1455.5715, Chi2Stat = 11.569967, PValue = 0.00067025601
4. Adding EmpStatus, Deviance = 1447.3451, Chi2Stat = 8.2264038, PValue = 0.0041285257
5. Adding CustAge, Deviance = 1442.8477, Chi2Stat = 4.4974731, PValue = 0.033944979
6. Adding ResStatus, Deviance = 1438.9783, Chi2Stat = 3.86941, PValue = 0.049173805
7. Adding OtherCC, Deviance = 1434.9751, Chi2Stat = 4.0031966, PValue = 0.045414057

Generalized linear regression model:
    status ~ [Linear formula with 8 terms in 7 predictors]
    Distribution = Binomial

Estimated Coefficients:
                   Estimate       SE       tStat       pValue  
                   ________    ________    ______    __________

    (Intercept)    0.70229     0.063959     10.98    4.7498e-28
    CustAge        0.57421      0.25708    2.2335      0.025513
    ResStatus       1.3629      0.66952    2.0356       0.04179
    EmpStatus      0.88373       0.2929    3.0172      0.002551
    CustIncome     0.73535       0.2159     3.406    0.00065929
    TmWBank         1.1065      0.23267    4.7556    1.9783e-06
    OtherCC         1.0648      0.52826    2.0156      0.043841
    AMBalance       1.0446      0.32197    3.2443     0.0011775


1200 observations, 1192 error degrees of freedom
Dispersion: 1
Chi^2-statistic vs. constant model: 88.5, p-value = 2.55e-16

Scale the scorecard points by the "points, odds, and points to double the odds (PDO)" method using the 'PointsOddsAndPDO' argument of formatpoints. Suppose that you want a score of 500 points to have odds of 2 (twice as likely to be good than to be bad) and that the odds double every 50 points (so that 550 points would have odds of 4).

Display the scorecard showing the scaled points for predictors retained in the fitting model.

sc = formatpoints(sc,'PointsOddsAndPDO',[500 2 50]);
PointsInfo = displaypoints(sc)
PointsInfo=33×3 table
     Predictors         Bin         Points
    ____________    ____________    ______

    'CustAge'       '[0,33)'        54.062
    'CustAge'       '[33,37)'       56.282
    'CustAge'       '[37,40)'       60.012
    'CustAge'       '[40,46)'       69.636
    'CustAge'       '[46,48)'       77.912
    'CustAge'       '[48,51)'        78.86
    'CustAge'       '[51,58)'        80.83
    'CustAge'       '[58,Inf]'       96.76
    'CustAge'       '<missing>'     64.984
    'ResStatus'     'Tenant'        62.138
    'ResStatus'     'Home Owner'    73.248
    'ResStatus'     'Other'         90.828
    'ResStatus'     '<missing>'     74.125
    'EmpStatus'     'Unknown'       58.807
    'EmpStatus'     'Employed'      86.937
    'CustIncome'    '[0,29000)'     29.375
      ⋮

Notice that points for the <missing> bin for CustAge and ResStatus are explicitly shown (as 64.9836 and 74.1250, respectively). These points are computed from the WOE value for the <missing> bin and the logistic model coefficients.

For predictors that have no missing data in the training set, there is no explicit <missing> bin. By default the points are set to NaN for missing data, and they lead to a score of NaN when running score. For predictors that have no explicit <missing> bin, use the name-value argument 'Missing' in formatpoints to indicate how missing data should be treated for scoring purposes.

For the purpose of illustration, take a few rows from the original data as test data and introduce some missing data. Also introduce some invalid, or out-of-range, values. For numeric data, values below the minimum (or above the maximum) allowed are considered invalid, such as a negative value for age (recall 'MinValue' was earlier set to 0 for CustAge and CustIncome). For categorical data, invalid values are categories not explicitly included in the scorecard, for example, a residential status not previously mapped to scorecard categories, such as "House", or a meaningless string such as "abc123".

tdata = dataMissing(11:18,mdl.PredictorNames); % Keep only the predictors retained in the model
% Set some missing values
tdata.CustAge(1) = NaN;
tdata.ResStatus(2) = '<undefined>';
tdata.EmpStatus(3) = '<undefined>';
tdata.CustIncome(4) = NaN;
% Set some invalid values
tdata.CustAge(5) = -100;
tdata.ResStatus(6) = 'House';
tdata.EmpStatus(7) = 'Freelancer';
tdata.CustIncome(8) = -1;
disp(tdata)
    CustAge     ResStatus      EmpStatus     CustIncome    TmWBank    OtherCC    AMBalance
    _______    ___________    ___________    __________    _______    _______    _________

      NaN      Tenant         Unknown          34000         44         Yes        119.8  
       48      <undefined>    Unknown          44000         14         Yes       403.62  
       65      Home Owner     <undefined>      48000          6         No        111.88  
       44      Other          Unknown            NaN         35         No        436.41  
     -100      Other          Employed         46000         16         Yes       162.21  
       33      House          Employed         36000         36         Yes       845.02  
       39      Tenant         Freelancer       34000         40         Yes       756.26  
       24      Home Owner     Employed            -1         19         Yes       449.61  

Score the new data and see how points are assigned for missing CustAge and ResStatus, because we have an explicit bin with points for <missing>. However, for EmpStatus and CustIncome the score function sets the points to NaN. The corresponding probabilities of default are also set to NaN.

[Scores,Points] = score(sc,tdata);
disp(Scores)
  481.2231
  520.8353
       NaN
       NaN
  551.7922
  487.9588
       NaN
       NaN
disp(Points)
    CustAge    ResStatus    EmpStatus    CustIncome    TmWBank    OtherCC    AMBalance
    _______    _________    _________    __________    _______    _______    _________

    64.984      62.138       58.807        67.893      61.858     75.622      89.922  
     78.86      74.125       58.807        82.439      61.061     75.622      89.922  
     96.76      73.248          NaN        96.969      51.132     50.914      89.922  
    69.636      90.828       58.807           NaN      61.858     50.914      89.922  
    64.984      90.828       86.937        82.439      61.061     75.622      89.922  
    56.282      74.125       86.937        70.107      61.858     75.622      63.028  
    60.012      62.138          NaN        67.893      61.858     75.622      63.028  
    54.062      73.248       86.937           NaN      61.061     75.622      89.922  
pd = probdefault(sc,tdata);
disp(pd)
    0.3934
    0.2725
       NaN
       NaN
    0.1961
    0.3714
       NaN
       NaN

Use the name-value argument 'Missing' in formatpoints to choose how to assign points to missing values for predictors that do not have an explicit <missing> bin. In this example, use the 'MinPoints' option for the 'Missing' argument. The minimum points for EmpStatus in the scorecard displayed above are 58.8072, and for CustIncome the minimum points are 29.3753. All rows now have a score and a corresponding probability of default.

sc = formatpoints(sc,'Missing','MinPoints');
[Scores,Points] = score(sc,tdata);
disp(Scores)
  481.2231
  520.8353
  517.7532
  451.3405
  551.7922
  487.9588
  449.3577
  470.2267
disp(Points)
    CustAge    ResStatus    EmpStatus    CustIncome    TmWBank    OtherCC    AMBalance
    _______    _________    _________    __________    _______    _______    _________

    64.984      62.138       58.807        67.893      61.858     75.622      89.922  
     78.86      74.125       58.807        82.439      61.061     75.622      89.922  
     96.76      73.248       58.807        96.969      51.132     50.914      89.922  
    69.636      90.828       58.807        29.375      61.858     50.914      89.922  
    64.984      90.828       86.937        82.439      61.061     75.622      89.922  
    56.282      74.125       86.937        70.107      61.858     75.622      63.028  
    60.012      62.138       58.807        67.893      61.858     75.622      63.028  
    54.062      73.248       86.937        29.375      61.061     75.622      89.922  
pd = probdefault(sc,tdata);
disp(pd)
    0.3934
    0.2725
    0.2810
    0.4954
    0.1961
    0.3714
    0.5022
    0.4304

Input Arguments

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Credit scorecard model, specified as a creditscorecard object. To create this object, use creditscorecard.

(Optional) Dataset to apply probability of default rules, specified as a MATLAB® table, where each row corresponds to individual observations. The data must contain columns for each of the predictors in the creditscorecard object.

Data Types: table

Output Arguments

collapse all

Probability of default, returned as a NumObs-by-1 numerical array of default probabilities.

More About

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Default Probability

After the unscaled scores are computed (see Algorithms for Computing and Scaling Scores), the probability of the points being “Good” is represented by the following formula:

ProbGood = 1./(1 + exp(-UnscaledScores))

Thus, the probability of default is

pd = 1 - ProbGood

References

[1] Refaat, M. Credit Risk Scorecards: Development and Implementation Using SAS. lulu.com, 2011.

Introduced in R2015a