A data mining routine has been applied to a transaction dataset and has classified 88

records as fraudulent (30 correctly so) and 952 as nonfraudulent (920 correctly so).

Construct the classification matrix and calculate the error rate.

Suppose that this routine has an adjustable cutoff (threshold) mechanism by which

you can alter the proportion of records classified as fraudulent Describe how moving

the cutoff up or down would affect

a. the classification error rate for records that are truly fraudulent;

b. the classification error rate for records that are truly nonfraudulent.

SA A large number of insurance records are to be examined to develop a model for

predicting fraudulent claims. Of the claims in the historical database, I % were judged

to be fraudulent. A sample is taken to develop a model, and oversampling is used to

provide a balanced sample in light of the very low response rate. When applied to

this sample , the model ends up correctly classifying 310 frauds, and 270