Machine learning for fraud detection

Fraud detection is a machine learning problem wherein we use historical data to build a model, which we will use to predict the outcome for future situations.

With the help of our cleaned historical transaction data, we will build a fraud detection model. To build the fraud detection model, we will apply the concepts of machine learning. A definition of machine learning is as follows:

"A computer program is said to learn from experience E with respect to some task T and some performance measure P, if its performance on T, as measured by P, improves with experience E."

                                                                  –Tom Mitchell, Carnegie Mellon University

Please note that the detailed explanation of machine learning is beyond the scope of this book.

Note

If you are interested in learning more about machine learning, go to http://www.r-bloggers.com/in-depth-introduction-to-machine-learning-in-15-hours-of-expert-videos/, where you will...