Introduction to Data Science

Adhitya Ronnie Effendie

Data Science

• An interdisciplinary field on methods of extracting knowledge from data in different

forms.
▪ Databases,
▪ Data mining,
▪ Data visualization,
▪ Machine learning/statistical learning
▪ Predictive analytics and big data has significant impact in the financial & actuarial
sectors
▪ Considerably improve the quality in the decision-making processes
▪ Give rise to FinTech (Financial Technology) & InsurTech (Insurance Technology)
Data Science Application in Actuarial
Sciences
• Asset Management
• Credit Risk Assessment
• Fraud Detection & Fraud Prevention
• Determining Lifetime Customer Value
• Payment & Purchasing Habits
Asset Management
• Scientific and objective asset management (e.g., Automated Trading &
Robo-Advising)
▪ Asset models built from massive amounts of data ➔ profitable
automated trading algorithms
▪ Robo-advisors consider all available data and historical trends and
a wide spectrum of investable assets
▪ Removes the emotion/sentiment & impressive ability of
diversification
Credit Risk Assessment
• Timely and credible credit risk assessment (e.g., identifying good/bad
borrowers)
▪ Precise evaluation opens an entirely new client base and sharply
lowers credit risk
▪ Credit score and unexpected items such as typing speed & word
usage can be used to build a more credible credit risk model
▪ Online capital lenders and others to determine the
creditworthiness of an individual by evaluating, say, 15,000 data
points, all at once.
Fraud Detection & Fraud Prevention
• Identifying frauds has long been critically important in finance and insurance
▪ E.g., fraudulent credit card transactions, fraudulent insurance claims
▪ Fraud prevention is a high priority of FinTech firms, many resources have
been poured in this direction
• The ability monitor transactions in real time and flag the ones that fall
outside of the “average norm” is a powerful tool in the war waged against
fraud.
▪ Use, say behavioral data, to identify the specific “average norm” for each
customer
▪ Some early warning systems have displayed good predictive ability
Determining Lifetime Customer Value
• Instead of treating customers in a one-time transaction mode, FinTech
allows the entire potential lifetime purchase volume to be assessed
▪ effective and efficient use of resources on customers most likely to be
of high value
• Creates the opportunity for upselling and targeted marketing
▪ Many “pre-approved” credit cards after having a salary direct deposit
▪ Lots of “financial advisor calls” from the bank when having a sizable
savings account
• Data like ranging from social media feeds to direct feedback via surveys
can be used to build a lifetime value model
Payment & Purchasing Habits
• Data Science allows a customer’s payment and purchase history to be
assessed at a granular level
▪ Opens the door for precise prediction models as to what behavior to
expect going forward
• This evaluation can vary
▪ basic analytical scores built on month-to-month volume of spending
▪ more complex calculations such as use of payment records and
spending habits
• Useful for target marketing, loyalty rewards, and other forms of active
customer interfacing
Machine Learning/Statistical Learning
(ML/SL)
• Machine learning and statistical learning (ML/SL) are both important subsets of Data Science
• Similarity: ML/SL studies the design of algorithms that can learn, particularly learning from
data
▪ Feeding data into ML/SL algorithms to improve the learning
▪ Eventually, the task becomes automated, i.e., without human interference in the activity
▪ Differences:
▪ ML arises from AI in CS; focuses more on large scale applications and prediction
accuracy
▪ SL arises from Statistics; emphasizes more on models and interpretability, and precision
& uncertainty
▪ The distinction between the two has become blurred overtime
 The Data Analytics Cycle
Predictive Analysis
MMA-3401:
Analitika Data
MMA-2401
Model Linear Tergeneralisasi
MMA-1402
Pemodelan Regresi dan Prescriptive Analysis
Runtun Waktu MMA-3401:
Analitika Data
MMS-3448
Descriptive
Statistical Machine
Analysis
Learning
MMS-1414:
Eksplorasi dan
Visualisasi Data