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I have two main options to calculate PD of a loan in a commercial bank; with and without machine learning.

On one hand, there are traditional methods such as Merton or KVM. On the other hand, I could use machine learning with random forests.

What are the pros/cons of using vs. not using machine learning? Are there any regulations inclined on one or the other?

I have two main options to calculate PD of a loan in a commercial bank; with and without machine learning.

On one hand, there are traditional methods such as Merton or KVM. On the other hand, I could use machine learning with random forests.

What are the pros/cons of using vs. not using machine learning?

I have two main options to calculate PD of a loan in a commercial bank; with and without machine learning.

On one hand, there are traditional methods such as Merton or KVM. On the other hand, I could use machine learning with random forests.

What are the pros/cons of using vs. not using machine learning? Are there any regulations inclined on one or the other?

Source Link
ps0604
ps0604
  • 50
  • 12

Calculating PD of commercial bank loan

I have two main options to calculate PD of a loan in a commercial bank; with and without machine learning.

On one hand, there are traditional methods such as Merton or KVM. On the other hand, I could use machine learning with random forests.

What are the pros/cons of using vs. not using machine learning?