Credit scoring models have been used traditionally as the basis of decisions to reject or accept credit applications. They are also used to categorize applicants or existing accounts into risk groups. Based on estimates of probability of default, the risk groups may seem well separated. However,...

In this study, we consider the construction of through-the-cycle ("TTC") PD models designed for credit underwriting uses and point-in-time ("PIT") PD models suitable for early warning uses, considering which validation elements should be emphasized in each case. We build PD models using a long...