As the name implies, logistic regression is fundamentally derived from the linear regression algorithm. The linear regression algorithm will be discussed in depth in the upcoming chapters. For now, let's consider a hypothetical case in which we want to predict the probability that a particular loan will default based on the loan's interest rate. Using linear regression, the following equation can be constructed:
Default = (Interest Rate × x) + c
In the preceding equation, c is the intercept and x is a coefficient that will be the output from the logistic regression model. The intercept and the coefficient will have numeric values. For the purpose of this example, let's assume c is 5 and x is -0.2. The equation now becomes this:
Default = (Interest Rate × -0.2) + 5
The equation can be represented in a...
