CFA Level I · CFA Level I Exam · Introduction to Financial Data Science
An analyst trains a model on labeled data in which each borrower record includes a known outcome of default or no default. The model is then used to predict outcomes for new borrowers. This approach is best described as:
The approach is supervised learning. The model is trained on records that already carry a known target label, default or no default, and learns to predict that label for new borrowers. Unsupervised methods have no labeled target, and reinforcement learning relies on rewards from actions.
- Asupervised learningCorrect
- Bunsupervised learning
- Creinforcement learning
Explanation
Supervised learning uses labeled data, meaning each observation has a known target, to learn a mapping from features to outcomes. Unsupervised learning has no target variable and looks for structure such as clusters. Reinforcement learning learns through rewards from interacting with an environment, which is not described here.
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