By a News Reporter-Staff News Editor at Investment Weekly News -- Researchers detail new data in Financial Economics. According to news originating from Washington, District of Columbia, by VerticalNews correspondents, research stated, "Receiver operating characteristic (ROC) and cumulative accuracy profile (CAP) analyses are alternative methods for evaluating a wide range of diagnostic systems, including assessments of credit risk. The ROC analysis is widely used in many fields, but in finance, the CAP analysis is more common."
Our news journalists obtained a quote from the research from International Monetary Fund, "We compare the two methods, by using as an illustration the ability of the Organization for Economic Cooperation and Development's country risk ratings to predict whether a country will have a programme with the International Monetary Fund (an indicator of financial distress). ROC and CAP analyses both have the advantage of generating measures of accuracy that are independent of the choice of diagnostic threshold, such as risk rating. The ROC analysis has other beneficial features, including theories for fitting models to data and for setting the optimal threshold, that we show could also be incorporated into the CAP analysis."
According to the news editors, the research concluded: "But the natural interpretation of the ROC measure of accuracy and the independence of ROC curves from the probability of default are advantages unavailable to the CAP analysis."
For more information on this research see: Appraising Credit Ratings: Does The Cap Fit Better Than The Roc? International Journal of Finance & Economics, 2013;18(4):396-408. International Journal of Finance & Economics can be contacted at: Wiley-Blackwell, 111 River St, Hoboken 07030-5774, NJ, USA. (Wiley-Blackwell - www.wiley.com/; International Journal of Finance & Economics - onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1158)
The news correspondents report that additional information may be obtained from R.J. Irwin, Int Monetary Fund, Washington, DC 20431, United States.
Keywords for this news article include: Washington, United States, Financial Economics, District of Columbia, North and Central America
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