encompasses a variety of statistical techniques from modeling, data mining
and game theory
that analyze current and historical facts to make predictions about future events.
In business, predictive models exploit patterns found in historical and transactional data to identify risks and opportunities. Models capture relationships among many factors to allow assessment of risk or potential associated with a particular set of conditions, guiding decision making
for candidate transactions.
Predictive analytics is used in actuarial science
, financial services
and other fields.
One of the most well-known applications is credit scoring
, which is used throughout financial services
. Scoring models process a customer’s credit history
, loan application
, customer data, etc., in order to rank-order individuals by their likelihood of making future credit payments on time. A well-known example would be the FICO score
Predictive analytics is an area of statistical analysis that deals with extracting information from data and using it to predict future trends and behavior patterns. The core of predictive analytics relies on capturing relationships between explanatory variables and the predicted variables from past occurrences, and exploiting it to predict future outcomes. It is important to note, however, that the accuracy and usability of results will depend greatly on the level... Read More