Have you seen this question before?
Let’s say you work for a bank that gives out personal loans. Your co-worker develops a model that takes in customer inputs and returns if a loan should be given or not.
- What kind of model did the co-worker develop?
- Another co-worker thinks they have developed a better model to predict defaults on the loans. Given that personal loans are monthly installments of payments, how would you measure the difference between the two credit risk models within a timeframe?
- What metrics would you track to measure the success of the new model?