7. Test Set Analysis, Financial Insights, and Delivery to the Client

Activity 7.01: Deriving Financial Insights

Solution:

1. Using the testing set, calculate the cost of all defaults if there were no counseling program.

   Use this code for the calculation:

   cost_of_defaults = np.sum(y_test_all * X_test_all[:,5])
   cost_of_defaults 

   The output should be this:

   60587763.0

2. Calculate by what percent the cost of defaults can be decreased by the counseling program.

   The potential decrease in the cost of default is the greatest possible net savings of the counseling program, divided by the cost of all defaults in the absence of a program:

   net_savings[max_savings_ix]/cost_of_defaults

   The output should be this:

   0.2214260658542551

   Results indicate that we can decrease the cost of defaults by 22% using a counseling program, guided by predictive modeling.

3. Calculate the net savings per account (considering all accounts it might be possible to counsel, in other words relative to the whole...