Applied Portfolio & Risk Management (FIN 30240) Assignment 2: Credit Scorecards 26th March 2017 General Instructions:  This assignment is to be completed in the same groups as used in Assignment 1  Students are required to use Matlab to complete all workings  The report is to be no longer than 3,500 words excluding references and any appendices  A soft copy of the report is to be submitted on SafeAssign by 5pm on the 14th of April with a soft copy and all Matlab coding used for calculations emailed to me by the same time  A hard copy is to be provided to me in the following Lecture  Academic references such as those supplied as course material and any other relevant academic research should help form the basis of your analysis  All references used must be outlined within the report and cited at the end of the report Assignment Details:  You are responsible for the development of a Behavioural Credit Scorecard for retail customers within the Risk Department of an Irish bank  Take the Credit Scorecard Data Excel file from Blackboard as your modelling data set  In order to develop your Behavioural Credit Scorecard you should carry out the following: 1. Data Management: o Complete an analysis of the data set o Conduct any data manipulations that may be required 2. Single Factor Analysis: o Generate optimal groupings within the candidate variables (justifying all decisions being taken) o Identify the strongest potential variables for inclusion 3. Multi-Factor Analysis: o Using the existing data set develop any new variables from this data that you might consider appropriate (justifying any such variables created) o Identify potential scorecards for use, considering variable correlations 4. Testing: o Perform hold-out sample testing in order to select the scorecard for use o Decide on the optimal scorecard to be used justifying your selection o Conduct sensitivity testing and robustness testing of your selected scorecard and revise you selection if necessary Note:  Consider utilising additional references outside of the course material  Ensure that you can justify all choices made, using quantitative rationale where