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Interview question

  • midlevel
  • 6 minsuggested time
  • 3Data scientist, Data analyst, ML engineer

A bank's card-fraud rule catches 95% of fraudulent transactions and flags 2% of legitimate ones. Fraud is 0.5% of the 200,000 transactions processed per day, and the fraud operations team can review 1,000 alerts a day. What share of alerts are actually fraud, and what would you tell the head of fraud operations?

Tests: Bayes' rule with base rates; translating sensitivity, false-positive rate and prevalence into precision (positive predictive value), daily alert volume and a capacity decision.

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