Credit Scoring, Response Modelling and Insurance Rating: A by Steven Finlay (auth.)

By Steven Finlay (auth.)

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Extra resources for Credit Scoring, Response Modelling and Insurance Rating: A Practical Guide to Forecasting Consumer Behaviour

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The output layer contains a single neuron. The inputs to the neuron in the output layer are the outputs from the neurons in the hidden layer. The output from the neuron in the output layer is the final score generated by the model. 4 is as a function of three separate linear models. The two neurons in the hidden layer each produce a linear model via the combination function. 4 A neural network and these form the components of the third linear model, represented by the combination function in the output layer neuron.

Business requirements on the other hand are primarily concerned with ensuring that the objectives of the project stakeholders are achieved. It doesn’t matter how good a model is from a technical perspective. If it fails to receive approval from key figures within the organization then the organization will view it as a failure. This means that in many situations the final model will be sub-optimal from a statistical perspective because of the business requirements that are imposed upon it. Over the years I’ve worked with many model developers who have been frustrated with the organizations they work for because they find themselves, as they see it, making compromises in terms of model quality in order to deliver something that is acceptable to the wider business.

Today, most people know nothing about engine mechanics, and how much someone knows about the workings of their car bears little relation to how well they drive it. If a warning light appears on the dashboard, then you know something is wrong and you need to do something about it. If you break down then you call your recovery service or the local garage. Another, sometimes controversial, perspective is that at the end of the day it really doesn’t matter how a model is created. The key question is, how well does the model perform?

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