Machine Learning Model for Stochastic Processes

Author(s): Benjamin Obi Tayo Ph.D.

Originally published on Towards AI.

Abstract: Using the loan_timing.csv dataset provided, we built a simple model using the Monte Carlo simulation for predicting the fraction of loans that will default after the 3-year duration of the loan. Our model revealed a 95% confidence interval of 14.8% +/- 0.2% for Monte-Carlo simulation of N = 1000 replicated copies of the dataset. Based on these analyses, if 50,000 loans were given out with a loan term of 3 years, approximately 15% of these loans will default during the loan term.

Introduction: Predicting the status of a loan is an important problem in risk assessment. A bank or financial… Read the full blog for free on Medium.

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Published via Towards AI