New Credit Risk Assessment Model

Requirements Clarification & Assessment

Understanding the Problem:

• Objective: Evaluate the effectiveness of a new credit risk assessment model.
• Type of Problem: Classification problem (Risk vs. No Risk).

Key Questions:

1. What is the primary goal of the model?
   • To predict the probability of default (PD) for loan applicants.
2. What are the regulatory requirements?
   • Ensure model fairness, transparency, and compliance with financial regulations.
3. What is the performance benchmark?
   • Compare against existing models or industry standards.

Dataset Requirements:

1. Training Dataset:
   • Historical credit data with labeled outcomes (default/no default).
   • Features including applicant demographics, credit history, financial status, etc.
2. Test/Validation Dataset:
   • Unseen data with similar features as the training set.
   • Data should reflect current market conditions.
3. External Datasets:
   • Economic indicators or industry-specific data for model robustness.