Scaling and Banding

Next is to convert proxies and coefficients into points that can be tallied into a score, which is needed for communicating model outputs, and implementation. There are two parts. (1) Scaling—i) what it means, why it’s done, and desired qualities; ii) percentages—why not; iii) fixed ranges—specify highest and lowest values; iv) scaling parameters—use of a benchmark score and odds, and fixed points-to-double odds; v) other considerations—presentation to a non-technical audience, and adverse reason codes. (2) Banding—i) zero constraints—neither the number of groups or risk of each; ii) fitted distributions—to match a specified frequency distribution; iii) benchmarked—to given average risk levels {AAA, AA+, AA, … C}; iv) fixed-band boundaries—upper and lower limits for each grade. The last two options are appropriate for Master Rating Scales, which are recommended to ensure consistency of meaning and communication within an organization.