[R] How to validate model?

[Pedro.Rodriguez at sungard.com]

Hi Frank,

Thanks for your feedback! But I think we are talking about two different
things.

1) Validation: The generalization performance of the classifier. See,
for example, "Studies on the Validation of Internal Rating Systems" by
BIS. 

2) Calibration: Correct calibration of a PD rating system means that the
calibrated PD estimates are accurate and conform to the observed default
rates. See, for instance, An Overview and Framework for
PD Backtesting and Benchmarking, by Castermans et al. 

Frank, you are referring the #1 and I am referring to #2. 

Nonetheless, I would never create a rating system if my model doesn't
discriminate better than a coin toss.

Regards,

Pedro 







-----Original Message-----
From: Frank E Harrell Jr [mailto:f.harrell at vanderbilt.edu] 
Sent: Tuesday, October 07, 2008 11:02 AM
To: Rodriguez, Pedro
Cc: maithili_shiva at yahoo.com; r-help at r-project.org
Subject: Re: [R] How to validate model?

Pedro.Rodriguez at sungard.com wrote:
> Usually one validates scorecards with the ROC curve, Pietra Index, KS
> test, etc. You may be interested in the WP 14 from BIS (www.bis.org).
> 
> Regards,
> 
> Pedro

No, the validation should be done using an absolute reliability 
(calibration) curve.  You need to verify that at all levels of predicted

risk there is agreement with the true probability of failure.  An ROC 
curve does not do that, and I doubt the others do.  A 
resampling-corrected loess calibration curve is a good approach as 
implemented in the Design package's calibrate function.

Frank

> 
> -----Original Message-----
> From: r-help-bounces at r-project.org
[mailto:r-help-bounces at r-project.org]
> On Behalf Of Maithili Shiva
> Sent: Tuesday, October 07, 2008 8:22 AM
> To: r-help at r-project.org
> Subject: [R] How to validate model?
> 
> Hi!
> 
> I am working on scorecard model and I have arrived at the regression
> equation. I have used logistic regression using R.
> 
> My question is how do I validate this model? I do have hold out sample
> of 5000 customers.
> 
> Please guide me. Problem is I had never used Logistic regression
earlier
> neither I am used to credit scoring models.
> 
> Thanks in advance
> 
> Maithili
> 
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> R-help at r-project.org mailing list
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> PLEASE do read the posting guide
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> 


-- 
Frank E Harrell Jr   Professor and Chair           School of Medicine
                      Department of Biostatistics   Vanderbilt
University