Model Development

Weights of Evidence and the Information Value

In order to determine which variables demonstrate a high level of predictive power, we calculate the binned Weights of Evidence (WoE) and the associate Information Value (IV). Generally speaking, the IV provides a measure of how well an explanatory variable  is able to distinguish between binary responses (e.g. "good" versus "bad") in some target variable. The idea is if a variable  has…

Age-Period-Cohort Model for Transition State Forecasting

You may be familiar with transition state models that are governed by the Age-Period-Cohort (APC) modelling framework. If you are, you've likely been witness to the recent insurgence of APC models in the literature -mainly being used to forecast mortgage and bond performance. The content related to APC modelling can be dense (literally, not figuratively) and you may find yourself confused when the the…