Paper offers method for evaluating machine learning models

Machine learning

Regulators must make “significant efforts” to evaluate machine learning models used to predict credit defaults, according to a new paper published by the Bank of Spain.

Andrés Alonso and José Manuel Carbó find machine learning models “outperform” traditional models when predicting credit default, but only up to a certain point.

“More advanced ML models may offer gains in classification power of up to 20%,” the authors say. “As the algorithmic complexity increases, the gains in predictive

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