Characteristic Selection
From Open Risk Manual
Definition
Characteristic Selection is an initial stage of Credit Scorecard Development that aims to create a sub-set of available set of characteristics. That subset will be used in the model development stage (although whether it is used in the final model is only determined later)
Requirements
- Informative about the Client (associated)
- Economically Meaningful Role / Signal
- Regulatory Compliance
- Availability on ongoing base (Data Sourcing)
- Temporal Stability
- Orthogonal to other variables (uncorrelated)
- Predictive of Default