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The value of information from a failure prediction model

  • R. A. I. Van Frederikslust

Abstract

In this chapter we discuss first the value of information from a failure prediction model. This is necessary since the gathering of information involves costs. The decision-maker will be scrutinized to determine whether returns balance against costs. We have shown in the previous chapter how the sample information from the discriminant analysis can be used in a decision rule. In Section 8.2 the expected opportunity loss attached to this rule is compared with that of a similar rule, but one in which the sample information is not used, and with that of a random, not optimal, decision rule. Finally, in Section 8.3 we discuss the possibilities and restrictions of the use of two different discriminant models by a lending institution to screen credit applicants.

Keywords

Discriminant Analysis Decision Rule Good Decision Expected Loss Discriminant Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© H. E. Stenfert Kroese B.V., Leiden 1978

Authors and Affiliations

  • R. A. I. Van Frederikslust

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