A Bank Wants to Understand Better the Details of Customers

question 6

Essay

A bank wants to understand better the details of customers who are likely to default the loan. In order to analyze this, the data from a random sample of 200 customers are given below:





In XLMiner's Partition with Oversampling procedure, partition the data so there is 50 percent successes (Loan default) in the training set and 40 percent of the validation data are taken away as test data. Construct a logistic regression model using Loan default as the output variable and all the other variables as input variables. Perform an exhaustive-search best subset selection with the number of best subsets equal to 2. Generate lift charts for both the validation data and test data.
a. From the generated set of logistic regression models, select one that is a good fit. Express the model as a mathematical equation relating the output variable to the input variables. Do the relationships suggested by the model make sense? Try to explain them.
b. Using the default cutoff value of 0.5 for your logistic regression model, what is the overall error rate on the test data?
c. Examine the decile-wise lift chart for your model on the test data. What is the first decile lift? Interpret this value.

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Definitions:

Sensory-acute

Having heightened or very sensitive sensory perceptions, such as sight, hearing, smell, taste, and touch.

Primary Aging

The natural and inevitable process of physical decline that occurs with advancing age, regardless of health habits or environmental factors.

Geriatric

Pertaining to the health, care, and diseases of elderly people, often focusing on medical management and quality of life.

Fully Recover

The process of returning to a state of health, wellness, or normal functioning after an illness, injury, or medical treatment.