To be able to balance the trade-off between your decline in income and a decline in expense, an optimization issue needs to be resolved by adjusting the limit and looking for the optimum.

To be able to balance the trade-off between your decline in income and a decline in expense, an optimization issue needs to be resolved by adjusting the limit and looking for the optimum.

Then by using the layout of the confusion matrix plotted in Figure 6, the four regions are divided as True Positive (TN), False Positive (FP), False Negative (FN) and True Negative (TN) if“Settled” is defined as positive and “Past Due” is defined as negative,. Aligned with all the confusion matrices plotted in Figure 5, TP may be the good loans hit, and FP could be the defaults missed. Our company is interested in both of these areas. To normalize the values, two widely used mathematical terms are defined: real Positive Rate (TPR) and False Positive Rate (FPR). Their equations are shown below:

In this application, TPR may be the hit price of good loans, also it represents the capacity of creating funds from loan interest; FPR is the lacking rate of standard, plus it represents the likelihood of taking a loss.Read more