credit risk/ the value of the business

hanaabdalrahmanhanaabdalrahman Member Posts: 9 Contributor I
edited December 2018 in Help

hello.. can you send me  some references  for the calculation of earn and lose money, i search about it but i get for some performance measures like ACC and error and others    thanks


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    kypexinkypexin Moderator, RapidMiner Certified Analyst, Member Posts: 291 Unicorn
    Solution Accepted

    I will duplicate my answer from personal message here, so may be it is useful for someone else. 


    There's not that much universal recipes out there, as such a calculation is very business-specific. 


    I can highly recommend you this book first: https://www.amazon.com/Data-Science-Business-Data-Analytic-Thinking/dp/1449361323 which is the best source on the topic of cost-centered approach to ML.


    You can also have a look at couple of my presentations and a webinar where I have evaluated a real life example of cost calculation:

    1) http://whatthefraud.wtf/2018-tula-labs-open-day/

    2) http://whatthefraud.wtf/selling-data-science/


    At the end, the most important thing underlying is how much a correct and incorrect prediction do cost for your business. Depending on an industry and a business model, this calculation might be either simple and straightforward, or arbitrary complex. 


    Specifically, for credit risk you have to answer this simple questions: 

    1) How much do I lose if a customer granted X amount of money do not pay it back?

    2) Hom much do I lose if I reject a loan applikcation to a good customer?

    3) How much do I earn if I give a loan of amount of X to a good customer and he pays it back? 


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