Applied Machine Learning: Identifying Credit Default

In recent years, we have witnessed machine learning gaining more and more popularity in solving traditional business problems. Every so often, a new algorithm is published, beating the current state of the art. It is only natural for businesses (in all industries) to try to leverage the incredible powers of machine learning in their core functionalities.

Before specifying the task we will be focusing on in this chapter, we provide a brief introduction to the field of machine learning. The machine learning domain can be broken down into two main areas: supervised learning and unsupervised learning. In the former, we have a target variable (label), which we try to predict as accurately as possible. In the latter, there is no target, and we try to use different techniques to draw some insights from the data.

We can further break down supervised problems into regression problems (where a target variable is a continuous number...