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ROC Dominant Score Cutoff Strategies

Dominant Score Cutoff Strategies

The purpose of this research is to develop new results for

(1) the equivalence of statistical, business and economic
dominance in risk scoring,

(2) dominant risk scoring strategies in the presence of
non-dominant scores, and

(3) the effect of Bayesian score combination on dominant
risk scoring strategies.

One can show that there is ROC dominance if and only if there
is dominance of expected profits or efficient frontiers that
involve different business measures such as profit/volume
tradeoffs. If there is no such dominance, an intersection of
the ROC curves for two different scores nevertheless yields
a dominant strategy for use of the different scorecards and
the cutoffs. Finally, we show that a Bayesian combination of
the two scores leads to a dominant ROC curve with a single
dominant strategy.


Financial Engineering Research Group at UVa

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