352 ◾ Waad Bouaguel, Ghazi Bel Mufti, and Mohamed Limam
◾ Collections and recoveries—behavioral scoring is also used to prioritize col-
lection activities to maximize recoveries and reduce collection costs.
◾ Estimating the default probability—estimating the borrower’s risk level,
namely, the PD, by assigning a dierent PD to each borrower is now widely
employed in many banks. PD indicates that a given counterparty will not
be able or willing to meet its obligations. e false estimation of PD leads to
unreasonable rating, incorrect pricing of nancial instruments, and thereby
it was one of the causes of the recent global nancial crisis.
In this chapter, we will address the application scoring problem also known as
“consumer credit scoring. ...