WTF is underwritng model

Hard Cut Rules: Imagine you have a library full of your favorite books. You want to lend your books to your friends, but you need some rules. One rule could be: "Only lend books to friends who have returned books in the past." That's a "hard cut rule" because there are no exceptions.

Rate Tables: Now, let's say you have different types of books: some are special limited editions, while others are more common. You decide to lend different types of books to different friends based on their history of returning books. A "rate table" is like a chart that helps you decide what type of book to lend to which friend. For instance, a friend who always returns books on time might be allowed to borrow a limited edition book, while someone who is often late in returning books might only be allowed to borrow a common book.

PMML (Predictive Model Markup Language): Now, imagine you have so many friends that it's hard to remember who has returned books in the past and who hasn't. To solve this problem, you use a smart computer program that can remember all the details about your friends and their borrowing history. This program uses a language called PMML to understand and predict which friends are likely to return the books they borrow.

Now, replace "books" with "money," and you'll understand how banks decide to give loans. They use "hard cut rules" to decide who can borrow, a PMML model to predict who will repay, and "rate tables" to decide the terms of the loan based on a person's predicted likelihood of repayment.

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