Credit to the private sector has risen rapidly in European emerging markets but its risk evaluation has been largely neglected. Using retail-loan banking data from the Czech Republic we construct two credit risk models based on logistic regression and Classification and Regression Trees. Both...

The paper reviews the best-developed and most frequently applied methods of credit scoring employed by commercial banks when evaluating loan applications. The authors concentrate on retail loans – applied research in this segment is limited, though there has been a sharp increase in the volume...

Lending money to different borrowers is profitable, but risky. The profits come from the interest rate and the fees earned on the loans. Banks do not want to make loans to borrowers who cannot repay them. Even if the banks do not intend to make bad loans, over time, some of them can become bad....

We herein introduce a new method of interpretable clustering that uses unsupervised binary trees. It is a three-stage procedure, the first stage of which entails a series of recursive binary splits to reduce the heterogeneity of the data within the new subsamples. During the second stage...