Appraising credit ratings : does the CAP fit better than the ROC? /

Appraising credit ratings : does the CAP fit better than the ROC? /

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Bibliographic Details
Author / Creator:	Irwin, R. John.
Imprint:	[Washington, District of Columbia] : International Monetary Fund, 2012.
Description:	1 online resource (25 pages) : illustrations.
Language:	English
Series:	IMF Working Paper ; WP/12/122 IMF working paper ; WP/12/122.
Subject:	Credit ratings -- Econometric models. Electronic books.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/13511530

Hidden Bibliographic Details
Other authors / contributors:	Irwin, Timothy C. International Monetary Fund. Fiscal Affairs Department.
ISBN:	9781475503517 1475503512 9781475598896 1475598890
ISSN:	1018-5941
Notes:	Includes bibliographical references. Online resource; title from PDF title page (ebrary, viewed June 17, 2014).
Summary:	ROC and CAP analysis are alternative methods for evaluating a wide range of diagnostic systems, including assessments of credit risk. ROC analysis is widely used in many fields, but in finance CAP analysis is more common. We compare the two methods, using as an illustration the ability of the OECD{u2019}s country risk ratings to predict whether a country will have a program with the IMF (an indicator of financial distress). ROC and CAP analyses both have the advantage of generating measures of accuracy that are independent of the choice of diagnostic threshold, such as risk rating. ROC analysis has other beneficial features, including theories for fitting models to data and for setting the optimal threshold, that we show could also be incorporated into CAP analysis. But the natural interpretation of the ROC measure of accuracy and the independence of ROC curves from the probability of default are advantages unavailable to CAP analysis.
Other form:	Print version: Irwin, R. John. Appraising credit ratings : does the CAP fit better than the ROC? [Washington, District of Columbia] : International Monetary Fund, ©2012 23 pages IMF working paper ; WP/12/122 9781475503517
Standard no.:	10.5089/9781475503517.001

Description
Summary:	ROC and CAP analysis are alternative methods for evaluating a wide range of diagnostic systems, including assessments of credit risk. ROC analysis is widely used in many fields, but in finance CAP analysis is more common. We compare the two methods, using as an illustration the ability of the OECD's country risk ratings to predict whether a country will have a program with the IMF (an indicator of financial distress). ROC and CAP analyses both have the advantage of generating measures of accuracy that are independent of the choice of diagnostic threshold, such as risk rating. ROC analysis has other beneficial features, including theories for fitting models to data and for setting the optimal threshold, that we show could also be incorporated into CAP analysis. But the natural interpretation of the ROC measure of accuracy and the independence of ROC curves from the probability of default are advantages unavailable to CAP analysis.
Physical Description:	1 online resource (25 pages) : illustrations.
Bibliography:	Includes bibliographical references.
ISBN:	9781475503517 1475503512 9781475598896 1475598890
ISSN:	1018-5941