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ROC Curve Calculator Spreadsheet Profitable Credit Card Customers

This spreadsheets calculates the area under the receiver operating curve for a model for a bank wishing to make a profit from their customers who regularly can’t pay off their credit card bills each month. Some Default and have to pay a penalty and others can only pay the minimum amount. Of course there is a certain percentage who continue to default and the bank must turn the case over to a collection agency. The bank has found that they can make a profit from these defaulting customers and a larger profit than from customers who pay their card off every month.

In this spreadsheet the model was developed and improved until the AUC=0.78. The maximum profit that the bank can make occurs at a threshold of -2.05 on thresholds ranging from-3.5 to 3.5. In this model a 1 is taken to be a non-profitable customer and a 0 a profitable customer. The cost for a false negative is $4800 and the profit for a true negative is $4100. 

Other variables that the spreadsheet calculates are:

1.Max Profit per event

2.Threshold at maximum profit per Event

3.Condition incidence

4.Base Rate Cost per Event

5.Incremental value of the model (savings per event)

Video Describing the Credit Card Profit/Loss Spreadsheet

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