This is how I interpret the question: A bank can't figure out PD only base on the application information. There should already have a model base on their existing customers to predict PD. And the application information is complex so CART may be the model the bank already have.
My...
Clustering identifies outliers that do not have strong connections with the rest of the data. You can't predict PD with clustering only.
For example , you can use clustering to divide the applicants into 10 classes. But without any PD information about some applicants in each class. You will...
OC is used to protect equity tranche. For example, the par value of the backed asserts are 100 million, and a MBS is issued with a value of 99 million. Then 1 million can be lost before any damage to the equity tranche.
Waterfall is used to protect senior tranche. Because the equity tranche...
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