Title: Credit risk evaluation: the application of scorecard in financial services

Authors: Desheng Dash Wu, Luis A. Seco

Addresses: School of Science and Engineering, Reykjavik University, Kringlunni 1, IS-103, Reykjavik, Iceland; RiskLab, University of Toronto, Toronto, Ontario M5S 3G8, Canada. ' Department of Mathematics, University of Toronto, 100 St. George St. Toronto ON M5S3G3, Canada

Abstract: In recent years, credit risk evaluation and credit default prediction have attracted a great deal of interests from both practitioners and regulators in the financial industry. This paper reviews various methods in credit risk evaluation. We demonstrate the use of a scorecard in a bank and validate the performance of such a scorecard through analysis of scores derived from scorecard models. The promising results potentially provide benefit to the financial sector in the areas of credit judgement, loan securitisation and retail credit risk management.

Keywords: credit risk evaluation; evaluation process; banking industry; risk assessment; scorecard models; credit judgement; loan securitisation; retail credit; risk management; financial services; banks.

DOI: 10.1504/IJFSM.2009.026635

International Journal of Financial Services Management, 2009 Vol.4 No.1, pp.38 - 47

Published online: 21 Jun 2009 *

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