5. Developing a Statistical Rating Model

Whereas heuristic and causal models allow considerable degrees of freedom in the development phase, the success of a statistical models depends heavily on the execution of the development stage, which must be carried out according to the following well-defined best practices.

1. Extraction of the sample data set
2. Development of the scoring function
3. Calibration of the the score values
4. Qualitative validation
5. Quantitative validation

(Chart 27: Procedure for Developing a Rating Model, from Rating Models and Validation: Guidelines on Credit Risk Management, Oesterreichische Nationalbank, 2004)