FRM Part II · FRM Exam Part II · Credit Scoring and Rating
A lender's logistic regression scorecard has a log-odds (good:bad) score. Points are scaled so that 600 points correspond to odds of 50:1 and every 20 points doubles the odds. What score corresponds to odds of 200:1?
The score is 640. Odds rising from 50:1 to 200:1 is a fourfold increase, equal to two doublings. At 20 points per doubling, the score rises by 40 points from the 600 anchor.
- A640Correct
- B620
- C680
- D660
Explanation
Going from 50:1 to 200:1 is a factor of 4, which is two doublings. Each doubling adds 20 points, so the score rises by 40, giving 640. Choosing 620 would count only one doubling.
Did you get it right without looking?
One question tells you little. A timed set on Credit Scoring and Rating shows your real accuracy, how long you take and where you lose marks.
More Credit Scoring and Rating questions
- A bank is designing its internal ratings-based (IRB) rating system for corporate exposures. The risk committee asks how the rating system mu…
- A retail bank builds a logistic regression scorecard to predict default on unsecured personal loans. An analyst proposes converting each con…
- A validator compares year-over-year rating migration for a bank's portfolio and finds that most obligors stay in their grade, but an unusual…
- Under Basel IRB requirements, which feature is expected of a bank's internal rating system for corporate exposures?
- A bank assigns obligors to rating grades using a through-the-cycle (TTC) philosophy. During a sharp recession, the portfolio's realized defa…
- A bank's validation team reviews a rating system for a portfolio of structured finance tranches. Before the crisis, many AAA-rated tranches …