Skip Navigation

IMA Journal of Management Mathematics 1997 8(4):305-321; doi:10.1093/imaman/8.4.305
© 1997 by Institute of Mathematics and its Applications
This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by HENLEY, W. E.
Right arrow Articles by Hand, D. j.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Construction of a k-nearest-neighbour credit-scoring system{dagger}

W. E. HENLEY and D. j. Hand

Department of Retail Credit Risk Policy, Abbey National pic 201 Grafton Gate East, Milton Keynes
Department of Statistics, The Open University Milton Keynes, MK1 6AA

This paper describes the construction of a credit-scoring system using the k-nearest-neighbour method, a standard technique in pattern recognition and non-parametric statistics. An important part of our analysis is the selection of distance metrics. We propose using an adjusted version of the euclidean distance metric, which incorporates an estimate of underlying equiprobability contours for class membership. This approach was used to classify a sample of applications for mail-order credit from the Littlewoods Organisation. We describe the results of comparison experiments with a range of discrimination techniques, including logistic regression, projection-pursuit regression, and decision trees.

Keywords: credit scoring; nearest neighbour classification


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.