Grabit: Gradient Tree Boosted Tobit Models for Default Prediction
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We introduce a novel model which is obtained by applying gradient tree boosting to the Tobit model. The so called Grabit model allows for modeling data that consist of a mixture of a continuous part and discrete point masses at the borders. Examples of this include censored data, fractional response data, corner solution response data, rainfall data, and binary classification data where additional information, that is related to the underlying classification mechanism, is available. In contrast to the Tobit model, the Grabit model can account for general forms of non-linearities and interactions, it is robust against outliers in covariates and scale invariant to monotonic transformations for the covariates, and its predictive performance is not impaired by multicollinearity. We apply the Grabit model for predicting defaults on loans made to Swiss small and medium-sized enterprises (SME), and we obtain a large improvement in predictive performance compared to other state-of-the-art approaches.
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