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Decision story

Where Should the Cut-Off Sit?

Where should the PD cut-off sit under a volume / risk budget?

Rates lift payments. Payments eat buffers. Watch where that pressure concentrates.

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The gate is a policy choice

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Ranking skill (Gini) is not the same as a cut-off you can ship. The operating point maximises approval subject to a bad-rate appetite among the approved.

Methodology

Directed film scrubbing a seeded application PD field. Champion scorecard and OOT cut-off metrics are frozen from PowerBI/11-credit-risk gold (LightGBM + Platt). Operating policy maximises OOT approval subject to bad rate among approved ≤ 4% appetite. Cloud marks are illustrative; published figures are calculated or observed as tagged in the evidence pack.

Limitations

Sample model only — not production IRB or IFRS 9. Competition history is not a live euro-area retail book. LGD 0.45 is illustrative. Mid-50s time-OOT Gini is honest for this public feature set. Budgeted appetite is an illustrative policy input.

Data references

  • [observed] Home Credit sample default rate ~8.07%
  • [calculated] Operating PD ≤ 7.5% under 4% appetite
  • [calculated] OOT Gini ~55.3%

Sources