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7 Jul 2019

One or Many Trees: Classification Models

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Businesses use the supervised machine learning techniques like Decision trees to make better decisions and make more profit. Decision tree is very popular technique because of its simplicity, ease to use and interpretability. It is a tree-based classification model. The technique has shortcomings such as sub-optimal performance, high variance and lack of robustness. An individual...
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28 May 2019

Decision Tree Explained

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Decision tree also known as classification tree, segmentation tree or recursive partitioning. It incorporates non-linear effect and high order interaction between predictors. It creates a tree-based classification model. It creates rules and use those rules to predict future events such as likelihood of default on a loan or classify the population into different groups such...
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23 May 2019

Neural Networks Explained

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The artificial neural network concept built upon the way human brain works to solve complex problem tasks.  Neural Network is a set of connected input/output units in which each connection associated with weights. The network learns by adjusting the weights of the model to predict the correct class label. Neural Network is a vast, complex...
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27 Nov 2017

Retail Credit and Scoring

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Acquiring and managing loan portfolios- including household mortgages, credit cards, automobile loans and all types of equity lines- are major components of the retail credit business. Different lenders have different means objectives such as minimize required loan loss reserves, minimize the cost of acquiring new customer, maximize the response rate on acquisitions, minimize the default...
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21 Aug 2017

Credit Card Risk Management Terminology

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FICO, Credit bureau,  Consumer bureau, Commercial bureau, Experian, Equifax, Transunion, CIBIL, Acquisition, Existing customer management, Collection, Recovery, Fraud, Delinquency Branded card, Co-branded card, Affinity card, Charge card, Smart card, Business card, Commercial card, Prepaid card, Customer, Merchant, Acquirer bank, Issuer bank, Association, Revolvers, Transactors Inactive, Active, Open, Closed, Revoked, VISA, Master Card, Rupay, Private Label,...
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15 Aug 2017

Book: How Successful People Grow

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John C. Maxwell describes 15 ways to get ahead in life in his book “How Successful People Grow”. The book helps to reach our greatest potential through following these 15 principles: Become an intentional learner (Growth doesn’t just happen) Develop self-awareness (You must know yourself to grow yourself) Believe in yourself (You must see value...
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11 Jun 2017

Portfolio Rebalancing: Why, When and How?

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Rebalancing plays an important role in portfolio management. It ensures the overall portfolio risk and takes advantage of buying-low and selling-high opportunities in the market. Rebalancing basically brings back the portfolio to original asset allocation. The objective of a rebalancing strategy is to minimize the risk relative to target asset allocation instead of maximizing returns....
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10 Dec 2016

Bull and Bear Signals based on Hidden Markov Model

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The Hidden Markov model (HMM) is typically used to predict the hidden regimes of observation data.  The idea here is looking for major changes in trend by analysing prices, which are observable. The “hidden” aspect is the market’s current state. Bear and bull markets aren’t directly observable and so these regimes can only be inferred...
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27 Nov 2016

SAS and R : Data Import and Export

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SAS and R are two statistical softwares which are widely used in various fields of research. SAS is licensed and paid software whereas R is free and open-source software. These two statistical softwares use almost every day by risk management professionals. To specify the path or directory where all files are stored and will be...
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