Machine Learning: Challenges and Opportunities in Credit Risk Modeling

Machine learning is a method of teaching computers to parse data, learn from it, and then make a determination or prediction regarding new data. Rather than hand-coding a specific set of instructions to accomplish a particular task, the machine is "trained" using large amounts of data and algorithms to learn how to perform the task. Both attempt to find and learn from patterns and trends within large datasets to make predictions. The machine learning field has a long tradition of development, but recent improvements in data storage and computing power have made them ubiquitous across many different fields and applications, many of which are very commonplace. Apple's Siri, Facebook feeds, and Netflix movie recommendations all rely upon some form of machine learning.