Question: QUESTION 3 Explain the Cumulative Accuracy Profile (CAP) test for discrimination of a logit model used to calculate the probability of default. Your answer should

QUESTION 3 Explain the Cumulative Accuracy Profile (CAP) test for discrimination

QUESTION 3 Explain the Cumulative Accuracy Profile (CAP) test for discrimination of a logit model used to calculate the probability of default. Your answer should include a description of how it is calculated interpretation, results for a perfect discriminating model, and the advantages and disadvantages of this test compared to other discrimination tests. (70% question weight) The following information is given Observation Rating (A is the best)Default (Yes-1,No-0) 0 6 0 9 10 0 Based on the above information, plot the cumulative accuracy profile and comment on the performance of the model used to calculate the Rating. (30% question weight)

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