Assignment – Part 4 (Case: Auto Finance)

Reading & Explaining the Data

Please download the data using the link

Click here

Please review the code below and execute it in your own RMD file.

Reading the Data

# reading the data
df <- read.csv("AutoFinanaceData.csv")

# attach the data frame
attach(df)

# Number of rows and columns
dim(df)

## [1] 28906    21

Printing the Column Names of the Data

# column names
colnames(df)

##  [1] "Agmt.No"        "ContractStatus" "StartDate"      "AGE"           
##  [5] "NOOFDEPE"       "MTHINCTH"       "SALDATFR"       "TENORYR"       
##  [9] "DWNPMFR"        "PROFBUS"        "QUALHSC"        "QUAL_PG"       
## [13] "SEXCODE"        "FULLPDC"        "FRICODE"        "WASHCODE"      
## [17] "Region"         "Branch"         "DefaulterFlag"  "DefaulterType" 
## [21] "DATASET"

List of Data Columns

DEFAULT

1. Defaulter Flag

• 1: Customer has delayed paying at least once

• 0: Otherwise

DEMOGRAPHIC VARIABLES

1. Gender

• SEXCODE = 1 (Male)

• SEXCODE = 0 (Female)

2. Age

3. Education

• QUALHSC

• QUAL_PG

4. Income

• Monthly Income in Thousands (MTHINCTH)

• Owns a Fridge (FRICODE)

• Owns a Washing Machine (WASHCODE)

5. Profession

• PROFBUS = 1 (BUSINESS)
• PROFBUS = 0 (PROFESSIONAL)

6. No.of Dependents

• NOOFDEPE

7. Region

LOAN-RELATED VARIABLES

1. Loan Tenor (TENORYR)

2. Fraction of Loan in Down Payment (DWNPMFR)

3. Gave Post-Dated Cheques (FULLPDC)

4. Branch

Structure of the Dataset

# structure
str(df)

## 'data.frame':    28906 obs. of  21 variables:
##  $ Agmt.No       : chr  "AP18100057" "AP18100140" "AP18100198" "AP18100217" ...
##  $ ContractStatus: chr  "Closed" "Closed" "Closed" "Closed" ...
##  $ StartDate     : chr  "19-01-01" "10-05-01" "05-08-01" "03-09-01" ...
##  $ AGE           : int  26 28 32 31 36 33 41 47 43 27 ...
##  $ NOOFDEPE      : int  2 2 2 0 2 2 2 0 0 0 ...
##  $ MTHINCTH      : num  4.5 5.59 8.8 5 12 ...
##  $ SALDATFR      : num  1 1 1 1 1 1 1 1 0.97 1 ...
##  $ TENORYR       : num  1.5 2 1 1 1 2 1 2 1.5 2 ...
##  $ DWNPMFR       : num  0.27 0.25 0.51 0.66 0.17 0.18 0.37 0.42 0.27 0.47 ...
##  $ PROFBUS       : int  0 0 0 0 0 0 0 0 0 0 ...
##  $ QUALHSC       : int  0 0 0 0 0 0 1 0 0 0 ...
##  $ QUAL_PG       : int  0 0 0 0 0 0 0 0 0 0 ...
##  $ SEXCODE       : int  1 1 1 1 1 1 1 1 1 1 ...
##  $ FULLPDC       : int  1 1 1 1 1 0 0 1 1 1 ...
##  $ FRICODE       : int  0 1 1 1 1 0 0 0 0 0 ...
##  $ WASHCODE      : int  0 0 1 1 0 0 0 0 0 0 ...
##  $ Region        : chr  "AP2" "AP2" "AP2" "AP2" ...
##  $ Branch        : chr  "Vizag" "Vizag" "Vizag" "Vizag" ...
##  $ DefaulterFlag : int  0 0 0 0 0 0 0 0 0 0 ...
##  $ DefaulterType : int  0 0 0 0 0 0 0 0 0 0 ...
##  $ DATASET       : chr  " " "BUILD" "BUILD" "BUILD" ...

Convert catgorical variables to factor

names <- c(10:20)
df[,names] <- lapply(df[,names] , factor)
str(df)

## 'data.frame':    28906 obs. of  21 variables:
##  $ Agmt.No       : chr  "AP18100057" "AP18100140" "AP18100198" "AP18100217" ...
##  $ ContractStatus: chr  "Closed" "Closed" "Closed" "Closed" ...
##  $ StartDate     : chr  "19-01-01" "10-05-01" "05-08-01" "03-09-01" ...
##  $ AGE           : int  26 28 32 31 36 33 41 47 43 27 ...
##  $ NOOFDEPE      : int  2 2 2 0 2 2 2 0 0 0 ...
##  $ MTHINCTH      : num  4.5 5.59 8.8 5 12 ...
##  $ SALDATFR      : num  1 1 1 1 1 1 1 1 0.97 1 ...
##  $ TENORYR       : num  1.5 2 1 1 1 2 1 2 1.5 2 ...
##  $ DWNPMFR       : num  0.27 0.25 0.51 0.66 0.17 0.18 0.37 0.42 0.27 0.47 ...
##  $ PROFBUS       : Factor w/ 2 levels "0","1": 1 1 1 1 1 1 1 1 1 1 ...
##  $ QUALHSC       : Factor w/ 2 levels "0","1": 1 1 1 1 1 1 2 1 1 1 ...
##  $ QUAL_PG       : Factor w/ 2 levels "0","1": 1 1 1 1 1 1 1 1 1 1 ...
##  $ SEXCODE       : Factor w/ 2 levels "0","1": 2 2 2 2 2 2 2 2 2 2 ...
##  $ FULLPDC       : Factor w/ 2 levels "0","1": 2 2 2 2 2 1 1 2 2 2 ...
##  $ FRICODE       : Factor w/ 2 levels "0","1": 1 2 2 2 2 1 1 1 1 1 ...
##  $ WASHCODE      : Factor w/ 2 levels "0","1": 1 1 2 2 1 1 1 1 1 1 ...
##  $ Region        : Factor w/ 8 levels "AP1","AP2","Chennai",..: 2 2 2 2 2 2 2 2 2 2 ...
##  $ Branch        : Factor w/ 14 levels "Bangalore","Chennai",..: 14 14 14 14 14 14 14 14 14 14 ...
##  $ DefaulterFlag : Factor w/ 2 levels "0","1": 1 1 1 1 1 1 1 1 1 1 ...
##  $ DefaulterType : Factor w/ 3 levels "0","1","2": 1 1 1 1 1 1 1 1 1 1 ...
##  $ DATASET       : chr  " " "BUILD" "BUILD" "BUILD" ...

Creating Train and Test dataset

Reserve 80% for training and 20% of test

# loading the package
library(caTools)

## Warning: package 'caTools' was built under R version 4.0.4

# fixing the observations 
set.seed(123)
# splitting the data 
split = sample.split(df$DefaulterFlag, SplitRatio = 0.75)
# creating the training set
trainingSet = subset(df, split == TRUE)
# creating the test set
testSet = subset(df, split == FALSE)

Section 1: Decision Tree

We made the decision tree using gini on training dataset, the decision tree as shown below.

library(caret)

## Loading required package: lattice

## Loading required package: ggplot2

set.seed(2345)
dTree <- train(DefaulterFlag ~ AGE
                       + NOOFDEPE
                       + MTHINCTH 
                       + SALDATFR 
                       + TENORYR
                       + DWNPMFR
                       + PROFBUS
                       + QUALHSC 
                       + QUAL_PG
                       + SEXCODE
                       + FULLPDC
                       + FRICODE
                       + WASHCODE
                       + Region, 
                       data = trainingSet, 
                       method = "rpart", 
                       parms = list(split = "gini"), 
                       trControl = trainControl(method = "cv"))
dTree

## CART 
## 
## 21679 samples
##    14 predictor
##     2 classes: '0', '1' 
## 
## No pre-processing
## Resampling: Cross-Validated (10 fold) 
## Summary of sample sizes: 19511, 19511, 19512, 19511, 19511, 19511, ... 
## Resampling results across tuning parameters:
## 
##   cp          Accuracy   Kappa    
##   0.01024164  0.7292763  0.2129099
##   0.01152184  0.7269239  0.2189725
##   0.01408225  0.7186214  0.1326211
## 
## Accuracy was used to select the optimal model using the largest value.
## The final value used for the model was cp = 0.01024164.

library(rpart.plot)

## Loading required package: rpart

prp(dTree$finalModel, box.palette = "Reds", tweak = 1.2, varlen = 20)

Using Decision Tree, We made Confusion Matrix, shown below, assuming threshold probability of 50%.

library(caret)
# predicted probabilities
predProbTestTree <- predict(dTree, testSet, type = "prob")
# confusion matrix using caret package
yPred <- ifelse(predProbTestTree[2] > 0.5, "Yes", "No")
predY <- as.factor(yPred)
levels(testSet$DefaulterFlag) <- c("No", "Yes")
confusionMatrix(data = predY, reference = testSet$DefaulterFlag, positive = "Yes")

## Confusion Matrix and Statistics
## 
##           Reference
## Prediction   No  Yes
##        No   434  297
##        Yes 1649 4847
##                                           
##                Accuracy : 0.7307          
##                  95% CI : (0.7203, 0.7409)
##     No Information Rate : 0.7118          
##     P-Value [Acc > NIR] : 0.0001805       
##                                           
##                   Kappa : 0.1867          
##                                           
##  Mcnemar's Test P-Value : < 2.2e-16       
##                                           
##             Sensitivity : 0.9423          
##             Specificity : 0.2084          
##          Pos Pred Value : 0.7462          
##          Neg Pred Value : 0.5937          
##              Prevalence : 0.7118          
##          Detection Rate : 0.6707          
##    Detection Prevalence : 0.8989          
##       Balanced Accuracy : 0.5753          
##                                           
##        'Positive' Class : Yes             
## 

Using Decision Tree, We made the ROC Curve, shown below

# loading the package
library(ROCR)

## Warning: package 'ROCR' was built under R version 4.0.4

DTPrediction <- predict(dTree, testSet,type = "prob")
DTPrediction <- prediction(DTPrediction[2],testSet$DefaulterFlag)
DTperformance <- performance(DTPrediction, "tpr","fpr")
# plotting ROC curve
plot(DTperformance,main = "ROC Curve",col = 2,lwd = 2)
abline(a = 0,b = 1,lwd = 2,lty = 3,col = "black")

Using Decision Tree, We calculated (AUC), shown below

library(ROCR)
# area under curve
DTPrediction <- prediction(predProbTestTree[2],testSet$DefaulterFlag)
aucDT <- performance(DTPrediction, measure = "auc")
aucDT <- aucDT@y.values[[1]]
aucDT

## [1] 0.6829464

Section 2: Random Forest

Que 1. Write R code to run the Random Forest Model on training dataset, the output is as shown below

library(caret)
# control parameters
trctrl <- trainControl(method = "none", classProbs = TRUE,)

## setting levels as "Yes" and "NO"
trainingSet$DefaulterFlag <- ifelse(trainingSet$DefaulterFlag == "1","Yes","No")

RFModel <- train(DefaulterFlag ~ AGE
                       + NOOFDEPE
                       + MTHINCTH 
                       + SALDATFR 
                       + TENORYR
                       + DWNPMFR
                       + PROFBUS
                       + QUALHSC 
                       + QUAL_PG
                       + SEXCODE
                       + FULLPDC
                       + FRICODE
                       + WASHCODE
                       + Region, 
                       data = trainingSet, 
                         method = "rf",
                         nbagg = 50,
                         parms  = list(split = "gini"),
                         trControl = trctrl,
                         importance = TRUE)
# model summary
RFModel

## Random Forest 
## 
## 21679 samples
##    14 predictor
##     2 classes: 'No', 'Yes' 
## 
## No pre-processing
## Resampling: None

Que 2. Using Random Forest model , Write R Code to generate following Confusion Matrix, shown below, assuming threshold probability of 50%.

library(caret)
# predicted probabilities
predProbTestRF <- predict(RFModel, testSet, type = "prob")
# confusion matrix using caret package
yPred <- ifelse(predProbTestRF[2] > 0.5, "Yes", "No")
predY <- as.factor(yPred)
levels(testSet$DefaulterFlag) <- c("No", "Yes")
confusionMatrix(data = predY, reference = testSet$DefaulterFlag, positive = "Yes")

## Confusion Matrix and Statistics
## 
##           Reference
## Prediction   No  Yes
##        No   710  552
##        Yes 1373 4592
##                                           
##                Accuracy : 0.7336          
##                  95% CI : (0.7233, 0.7438)
##     No Information Rate : 0.7118          
##     P-Value [Acc > NIR] : 1.89e-05        
##                                           
##                   Kappa : 0.2646          
##                                           
##  Mcnemar's Test P-Value : < 2.2e-16       
##                                           
##             Sensitivity : 0.8927          
##             Specificity : 0.3409          
##          Pos Pred Value : 0.7698          
##          Neg Pred Value : 0.5626          
##              Prevalence : 0.7118          
##          Detection Rate : 0.6354          
##    Detection Prevalence : 0.8254          
##       Balanced Accuracy : 0.6168          
##                                           
##        'Positive' Class : Yes             
## 

Que 3- Which Machine Leraning technique (Decision Tree or Random Forest) is better based on Sensitivity? Explain your reasoning

# Answer - Decision Tree

Que 4- Which Machine Leraning technique (Decision Tree or Random Forest) is better based on Specificity? Explain your reasoning

# random Forest

Que 5- Using Random Forest Model Write R code to Plot the ROC curve, as shown below

# loading the package
library(ROCR)
RFPrediction <- predict(RFModel, testSet,type = "prob")
RFPrediction <- prediction(RFPrediction[2],testSet$DefaulterFlag)
RFperformance <- performance(RFPrediction, "tpr","fpr")
# plotting ROC curve
plot(RFperformance,main = "ROC Curve",col = 2,lwd = 2)
abline(a = 0,b = 1,lwd = 2,lty = 3,col = "black")

Que 6- Using Random Forest Model Write R code to calculate the AUC (Area Under Curve).

library(ROCR)
# area under curve
RFPrediction <- prediction(predProbTestRF[2],testSet$DefaulterFlag)
aucRF <- performance(RFPrediction, measure = "auc")
aucRF <- aucRF@y.values[[1]]
aucRF

## [1] 0.7237563

Que 7- Which Machine Leraning technique (Decision Tree or Random Forest) is better based on AUC? Explain your reasoning

# random Forest

Section 3: Bagging

Que 8. Write R code to run the Bagging Model on training dataset, the output is as shown follows

library(caret)
set.seed(123)
# control parameters
trctrl <- trainControl(method = "none", classProbs = TRUE,)

## setting levels as "Yes" and "NO"
#trainingSet$DefaulterFlag <- ifelse(trainingSet$DefaulterFlag == "1","Yes","No")

BaggingModel <- train(DefaulterFlag ~ AGE
                       + NOOFDEPE
                       + MTHINCTH 
                       + SALDATFR 
                       + TENORYR
                       + DWNPMFR
                       + PROFBUS
                       + QUALHSC 
                       + QUAL_PG
                       + SEXCODE
                       + FULLPDC
                       + FRICODE
                       + WASHCODE
                       + Region, 
                       data = trainingSet, 
                         method = "treebag",
                         nbagg = 50,
                         trControl = trctrl,
                         importance = TRUE)
# model summary
BaggingModel

## Bagged CART 
## 
## 21679 samples
##    14 predictor
##     2 classes: 'No', 'Yes' 
## 
## No pre-processing
## Resampling: None

Que 9. Using Bagging model , Write R Code to generate following Confusion Matrix, shown below, assuming threshold probability of 50%.

library(caret)
# predicted probabilities
predProbTestBagg <- predict(BaggingModel, testSet, type = "prob")
# confusion matrix using caret package
yPred <- ifelse(predProbTestBagg[2] > 0.5, "Yes", "No")
predY <- as.factor(yPred)
levels(testSet$DefaulterFlag) <- c("No", "Yes")
confusionMatrix(data = predY, reference = testSet$DefaulterFlag, positive = "Yes")

## Confusion Matrix and Statistics
## 
##           Reference
## Prediction   No  Yes
##        No   744  706
##        Yes 1339 4438
##                                           
##                Accuracy : 0.717           
##                  95% CI : (0.7065, 0.7274)
##     No Information Rate : 0.7118          
##     P-Value [Acc > NIR] : 0.1651          
##                                           
##                   Kappa : 0.2418          
##                                           
##  Mcnemar's Test P-Value : <2e-16          
##                                           
##             Sensitivity : 0.8628          
##             Specificity : 0.3572          
##          Pos Pred Value : 0.7682          
##          Neg Pred Value : 0.5131          
##              Prevalence : 0.7118          
##          Detection Rate : 0.6141          
##    Detection Prevalence : 0.7994          
##       Balanced Accuracy : 0.6100          
##                                           
##        'Positive' Class : Yes             
## 

Que 10- Which Machine Leraning technique (Bagging or Random Forest) is better based on Sensitivity? Explain your reasoning

# Answer - Random Forest

Que 11- Which Machine Leraning technique (Bagging or Random Forest) is better based on Specificity? Explain your reasoning

# Bagging

Que 12- Using Bagging Model Write R code to Plot the ROC curve, as shown below

# loading the package
library(ROCR)
BaggPrediction <- predict(BaggingModel, testSet,type = "prob")
BaggPrediction <- prediction(BaggPrediction[2],testSet$DefaulterFlag)
Baggperformance <- performance(BaggPrediction, "tpr","fpr")
# plotting ROC curve
plot(Baggperformance,main = "ROC Curve",col = 2,lwd = 2)
abline(a = 0,b = 1,lwd = 2,lty = 3,col = "black")

Que 13- Using Bagging Model Write R code to calculate the AUC (Area Under Curve).

library(ROCR)
# area under curve
BaggPrediction <- prediction(predProbTestBagg[2],testSet$DefaulterFlag)
aucBagg <- performance(BaggPrediction, measure = "auc")
aucBagg <- aucBagg@y.values[[1]]
aucBagg

## [1] 0.7010126

Que 14- Which Machine Leraning technique (Bagging or Random Forest) is better based on AUC? Explain your reasoning

# random Forest

Que 15- Write R code to draw ROC curves for Decision Tree, Random Forest & Bagging on same graph using test dataset.

# List of predictions
predList <- list(predProbTestTree[2],predProbTestRF[2],predProbTestBagg[2])

# List of actual values (same for all)
m <- length(predList)

# ROC curves (logit and tree)
plot(DTperformance, col = "black", lwd = 2)
plot(RFperformance, add = TRUE, col = "red", lwd = 3)
plot(Baggperformance, add = TRUE, col = "green", lwd = 4)
legend(x = "bottomright", 
       legend = c("Decision Tree", "Random Forest","Bagging"),fill = 1:m)

Que 16- On the basis of ROC & AUC which Model is doing better job (Decision Tree, Random Forest or Bagging), please explain in detail.

# Random Forest Model is better, because for this AUC is high compare to others.

Que 17- Based on the overall analysis which ML technique is better and why? Please explain in detail.