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enter image description here In the first problem, it's been told to accept the maximum number of good customers, if at least 98% of the customers that are do not repay their debt correctly identified.

I am confused about what is meant by this? Do I need to train the models and set the threshold value accordingly so that I may obtain 98% accuracy? And for the second one, I need to decrease the threshold value so that accuracy comes down to 85%?

I am stuck in this for a while. Please help me show the correct path. Thanks.

data: German Credit Risk data.

Variables: Several independent variables with the dependent variable "Credit_Risk" which responses in "Good" and "Bad".

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1 Answer 1

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  1. The goal is to identify at least 98% of the customers, that do not repay their debt. So the bank can "accept a maximum number of 'good' customers, that can be granted loans" Here the goal is focused on the bad customers.

  2. There should be at least 85% good customers accepted while the side focus is to reject as many bad customers as possible.

I think the difference between 1) and 2) is identifying bad customers in 1) and good customers in 2)

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  • $\begingroup$ Thanks for your helpful comment. But I need to get things a little clearer. Suppose I have 700 good and 300 bad cases. So for question 1, my task is to predict 98% of these 300 bad cases? And the similar thing for the 2nd question? And to do this, should I train a model and set the threshold value accordingly so that I get 98% of the bad category correctly identified? (for the 1st question) $\endgroup$ Apr 12, 2021 at 1:31
  • $\begingroup$ Yes, this is exactly how I interpret this $\endgroup$
    – Turnvater
    Apr 12, 2021 at 7:09
  • $\begingroup$ Thanks for your kind suggestion. I guess this should be the right interpretation too. $\endgroup$ Apr 12, 2021 at 15:12

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