Monotonic Binning with GBM

March 31, 2019
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In addition to monotonic binning algorithms introduced in my previous post (https://statcompute.wordpress.com/2019/03/10/a-summary-of-my-home-brew-binning-algorithms-for-scorecard-development), two more functions based on Generalized Boosted Regression Models have been added to my GitHub repository, gbm_bin() and gbmcv_bin().

The function gbm_bin() estimates a GBM model without the cross validation and tends to generate a more granular binning outcome.

The function gbmcv_bin() estimates a GBM model with the cross validation (CV). Therefore, it would generate a more stable but coarse binning outcome. Nonetheless, the computation is more expensive due to CV, especially for large datasets.

Motivated by the idea of my friend Talbot (https://www.linkedin.com/in/talbot-katz-b76785), I also drafted a function pava_bin() based upon the Pool Adjacent Violators Algorithm (PAVA) and compared it with the iso_bin() function based on the isotonic regression. As shown in the comparison below, there is no difference in the binning outcome. However, the computing cost of pava_bin() function is higher given that PAVA is an iterative algorithm solving for the monotonicity.

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