Abstract
This paper presents a novel concept of model futility to capture the dynamic feature of modeling risk. Three key components, monitoring statistic, possibility of being futile and futility boundaries are specified. We apply this approach in banking default risk modeling monitoring to solve the optimal pairing ratio problem. Its effectiveness and efficiency are demonstrated by comparison with testing approach which is currently prevailing in banking models validation.
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© 2007 Springer-Verlag Berlin Heidelberg
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Shi, X.J. (2007). Model Futility and Dynamic Boundaries with Application in Banking Default Risk Modeling. In: Chen, B., Paterson, M., Zhang, G. (eds) Combinatorics, Algorithms, Probabilistic and Experimental Methodologies. ESCAPE 2007. Lecture Notes in Computer Science, vol 4614. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-74450-4_15
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DOI: https://doi.org/10.1007/978-3-540-74450-4_15
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-74449-8
Online ISBN: 978-3-540-74450-4
eBook Packages: Computer ScienceComputer Science (R0)