Aligning Scores
Past few days, IITs have been in news again. HRD minister Kapil Sibal wants to give more weightage to class twelfth performance. He wants minimum marks to be eighty percent. While this proposal has been topic of hot discussion, I would like to comment on the implementation of this proposal from statistical perspective.
The burning question, we all will agree, is that not two board examination is similar in terms of strictness in awarding marks. While, it’s easier, I mean relatively easier, to get 90% in CBSE and ICSE , it’s next to impossible to get similar marks in few state boards (Bihar Intermediate examination).
Now, if we want to have the effect of screening rule to be uniform, we need to account for this observed reality. This can be done through aligning a standard mark (CBSE) and state board marks.
Before getting into the details of approaches to accommodate the indiscrepancy, let us list down few business scenarios where we might have to do similar task.
Competitor Analysis:
a) An auto finance company gets number of request for refinance of auto loans. In this situation, the company would have data of interest rate charged by previous financier. It would have complete application data and bureau data for the customer. Interest rate charged is function of application data and internally developed risk score based on bureau data. Now if an auto finance company is able to align its internal risk score with competitors risk score, it certainly has an edge over competitor. The detail will be clear from the paper linked below.
b) A similar problem for insurance company: Please have a look at this patented method for aligning two scores. It can potentially help company to align the premium it will charge with competitor’s premium. Unfortunately, like all the patent filing document, it’s not very easy to get hold of methodology at one reading. Allow me to digress for a while; but it would be really helpful if law enforces patentee to file an easy- to- understand document along with the usual patent filing. It’s understandable why patentees constructs the claim the way they do, it’s necessary to prove infringement.
There are various examples in competitor analysis domain where we would have to perform similar task. Other scenario could be, lets say risk team has developed a risk scorecard that is one of the input for pricing. Earlier risk team used traditional FICO score, but in newer model they have used Nextgen score for internal risk scorecard. Pricing team applies rule on FICO score and Internal risk score. With new risk score, pricing team has to apply rule on Nextgen score and internal score, but they don’t have access to Nextgen score of previous customers to reprice them.
Having explained few examples where aligning score is of paramount importance, we have to solve the problem of aligning marks. The details would be there in next post.
