According to Moore’s law, computing power doubles up each two years. This performance increase in computing power makes machine learning increasingly efficient each year, and widely applicable. But does this also apply to credit risk issues?
Machine learning (ML) models have already been around for decades. The exponential growth in computing power and data availability, however, has resulted in many new opportunities for ML models. One possible application is to use them in financial institutions’ risk management. This article gives a brief introduction of ML models, followed by the most promising opportunities for using ML models in financial risk management.