# Tobit

Create Tobit model object for exposure at default

## Description

Create and analyze a Tobit model object to calculate the exposure at default (EAD) using this workflow:

1. Use fitEADModel to create a Tobit model object.

2. Use predict to predict the EAD.

3. Use modelDiscrimination to return AUROC and ROC data. You can plot the results using modelDiscriminationPlot.

4. Use modelAccuracy to return the R-squared, RMSE, correlation, and sample mean error of predicted and observed EAD data. You can plot the results using modelAccuracyPlot.

## Creation

### Description

example

example

TobitEADModel = fitLGDModel(___,Name,Value) specifies options using one or more name-value pair arguments in addition to the input arguments in the previous syntax. The optional name-value pair arguments set the model object properties. For example, eadModel = fitEADModel(EADData,ModelType,'PredictorVars',{'UtilizationRate','Age','Marriage'},'ConversionMeasure',"ccf",'DrawnVar','Drawn','LimitVar','Limit','ResponseVar','EAD') creates an eadModel object using a Tobit model type.

### Input Arguments

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Data for exposure at default, specified as a table.

Data Types: table

Model type, specified as a string with the value of "Tobit" or a character vector with the value of 'Tobit'.

Data Types: char | string

Tobit Name-Value Pair Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside quotes. You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

User-defined model ID, specified as the comma-separated pair consisting of 'ModelID' and a string or character vector. The software uses the ModelID text to format outputs and is expected to be short.

Data Types: string | char

User-defined description for model, specified as the comma-separated pair consisting of 'Description' and a string or character vector.

Data Types: string | char

Predictor variables, specified as the comma-separated pair consisting of 'PredictorVars' and a string array or cell array of character vectors. PredictorVars indicates which columns in the data input contain the predictor information. By default, PredictorVars is set to all the columns in the data input except for ResponseVar.

Data Types: string | cell

Response variable, specified as the comma-separated pair consisting of 'ResponseVar' and a string or character vector. The response variable contains the EAD data and must be a numeric variable with values between 0 and 1 (inclusive). An EAD value of 0 indicates no loss (full recovery), 1 indicates total loss (no recovery), and values between 0 and 1 indicate a partial loss. By default, ResponseVar is set to the last column.

Data Types: string | char

Limit variable, specified as the comma-separated pair consisting of 'LimitVar' and a string or character vector. LimitVar indicates which column in data contains the limit amount. LimitVar is required when ConversionMeasure is 'ccf' or 'lcf'.

Data Types: string | char

Drawn variable, specified as the comma-separated pair consisting of 'DrawnVar' and a string or character vector. DrawnVar indicates which column in data contains the limit amount. DrawnVar is required when ConversionMeasure is 'ccf'.

Data Types: string | char

Response transform, specified as the comma-separated pair consisting of 'ConversionMeasure' and a character vector or string.

• "ccf" — Credit conversion factor (CCF) is the portion of the undrawn amount that will be converted into credit. The undrawn amount is the limit minus the drawn amount. The EAD thus becomes the drawn amount plus the CCF times the limit minus the drawn amount (EAD = Drawn + CCF*(Limit - Drawn)) .

• "lcf" — Limit conversion factor (LCF) is a fraction of the limit representing the total exposure. The EAD is then defined as the LCF times the limit (EAD = LCF*Limit).

Data Types: string | char

Censoring side, specified as the comma-separated pair consisting of 'CensoringSide' and a character vector or string. CensoringSide indicates whether the desired Tobit model is left-censored, right-censored, or censored on both sides.

Data Types: string | char

Left-censoring limit, specified as the comma-separated pair consisting of 'LeftLimit' and a scalar numeric between 0 and 1.

Data Types: double

Right-censoring limit, specified as the comma-separated pair consisting of 'RightLimit' and a scalar numeric between 0 and 1.

Data Types: double

Options for fitting, specified as the comma-separated pair consisting of 'SolverOptions' and an optimoptions object that is created using optimoptions from Optimization Toolbox™. The defaults for the optimoptions object are:

• "Display""none"

• "Algorithm""sqp"

• "MaxFunctionEvaluations"500 ✕ Number of model coefficients

• "MaxIterations" — The number of Tobit model coefficients is determined at run time; it depends on the number of predictors and the number of categories in the categorical predictors.

Data Types: object

## Properties

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User-defined model ID, returned as a string.

Data Types: string

User-defined description, returned as a string.

Data Types: string

Underlying statistical model, returned as a compact linear model object. The compact version of the underlying regression model is an instance of the classreg.regr.CompactLinearModel class. For more information, see fitlm and CompactLinearModel.

Data Types: string

Predictor variables, returned as a string array.

Data Types: string

Response variable, returned as a string.

Data Types: string

Limit variable, returned as a string.

Data Types: string

Drawn variable, returned as a string.

Data Types: string

Response transform, returned as a string.

Data Types: string

Censoring side, returned as a string.

Data Types: string

Left-censoring limit, returned as a scalar numeric between 0 and 1.

Data Types: double

Right-censoring limit, returned as a scalar numeric between 0 and 1.

Data Types: double

## Object Functions

 predict Predict exposure at default modelDiscrimination Compute AUROC and ROC data modelDiscriminationPlot Plot ROC curve modelAccuracy Compute R-square, RMSE, correlation, and sample mean error of predicted and observed EADs modelAccuracyPlot Scatter plot of predicted and observed EADs

## Examples

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This example shows how to use fitEADModel to create a Tobit model for exposure at default (EAD).

ans=8×6 table
UtilizationRate    Age     Marriage        Limit         Drawn          EAD
_______________    ___    ___________    __________    __________    __________

0.24359        25     not married         44776         10907         44740
0.96946        44     not married    2.1405e+05    2.0751e+05         40678
0        40     married        1.6581e+05             0    1.6567e+05
0.53242        38     not married    1.7375e+05         92506        1593.5
0.2583        30     not married         26258        6782.5        54.175
0.17039        54     married        1.7357e+05         29575        576.69
0.18586        27     not married         19590          3641        998.49
0.85372        42     not married    2.0712e+05    1.7682e+05    1.6454e+05

rng('default');
c = cvpartition(NumObs,'HoldOut',0.4);
TrainingInd = training(c);
TestInd = test(c);

Select Model Type

Select a model type for Tobit or Regression.

ModelType = "Tobit";

Select Conversion Measure

Select a conversion measure for the EAD response values.

ConversionMeasure = "LCF";

Tobit with properties:

CensoringSide: "both"
LeftLimit: 0
RightLimit: 1
ModelID: "Tobit"
Description: ""
UnderlyingModel: [1x1 risk.internal.credit.TobitModel]
PredictorVars: ["UtilizationRate"    "Age"    "Marriage"]
LimitVar: "Limit"
DrawnVar: "Drawn"
ConversionMeasure: "lcf"

Display the underlying model. The underlying model's response variable is the transformation of the EAD response data. Use the 'LimitVar' and 'DrawnVar' name-value arguments to modify the transformation.

Tobit regression model:
Y* ~ 1 + UtilizationRate + Age + Marriage

Estimated coefficients:
Estimate         SE         tStat       pValue
__________    __________    ________    ________

(Intercept)                0.22735      0.025005      9.0922           0
UtilizationRate            0.47364      0.016531      28.652           0
Age                     -0.0013929    0.00061479     -2.2657    0.023517
Marriage_not married     -0.006888       0.01208    -0.57022     0.56856
(Sigma)                    0.36419      0.003878      93.913           0

Number of observations: 4378
Number of left-censored observations: 0
Number of uncensored observations: 4377
Number of right-censored observations: 1
Log-likelihood: -1791.06

EAD prediction operates on the underlying compact statistical model and then transforms the predicted values back to the EAD scale. You can specify the predict function with different options for the 'ModelLevel' name-vale argument.

For model validation, use modelDiscrimination, modelDiscriminationPlot, modelAccuracy, and modelAccuracyPlot.

Use modelDiscrimination and then modelDiscriminationPlot to plot the ROC curve.

ModelLevel = "ConversionMeasure";

Use modelAccuracy and then modelAccuracyPlot to show a scatter plot of the predictions.

YData = "Observed";

Plot a histogram of observed with respect to the predicted EAD.

figure;
histogram(AccData1.Observed);
hold on;
histogram(AccData1.(('Predicted_' + ModelType)));
legend('Observed','Predicted');

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## References

[1] Baesens, Bart, Daniel Roesch, and Harald Scheule. Credit Risk Analytics: Measurement Techniques, Applications, and Examples in SAS. Wiley, 2016.

[2] Bellini, Tiziano. IFRS 9 and CECL Credit Risk Modelling and Validation: A Practical Guide with Examples Worked in R and SAS. San Diego, CA: Elsevier, 2019.

[3] Brown, Iain. Developing Credit Risk Models Using SAS Enterprise Miner and SAS/STAT: Theory and Applications. SAS Institute, 2014.

[4] Roesch, Daniel and Harald Scheule. Deep Credit Risk. Independently published, 2020.

### Topics

Introduced in R2021b