What is a common use of Decision Trees in finance?

What is a common use of Decision Trees in finance?

Step 1: Understand what a Decision Tree is. It is a tool that helps make decisions by splitting data into branches based on certain criteria.
Step 2: Recognize that in finance, one common problem is detecting fraud in transactions.
Step 3: Know that Decision Trees can analyze transaction data to identify patterns that indicate whether a transaction is legitimate or fraudulent.
Step 4: Learn that by using a Decision Tree, financial institutions can classify each transaction into two categories: 'legitimate' or 'fraudulent'.
Step 5: Understand that this classification helps banks and companies take action to prevent fraud and protect customers.

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