Advanced Applications Flashcards

A Capital One product team is analyzing customer lifetime value (CLV). If average monthly revenue per customer is $45, monthly churn rate is 3%, and gross margin is 70%, what is the CLV?

Answer: $1,050

CLV = (Monthly revenue × Gross margin) / Churn rate = ($45 × 0.70) / 0.03 = $31.50 / 0.03 = $1,050.

Which Python pandas method efficiently fills missing values in a time-series transaction dataset using the previous valid observation?

Answer: df.fillna(method='ffill')

ffill (forward fill) propagates the last valid observation forward, which preserves the last known state in a time series.

An analyst is evaluating two credit models. Model A has AUC-ROC of 0.82; Model B has AUC-ROC of 0.79 but captures 15% more high-risk customers. Which factor should drive the final model selection?

Answer: Business objective — if minimizing defaults is the priority, higher recall on high-risk customers may outweigh AUC

Model selection depends on business objectives; a lower AUC model that catches more high-risk customers may reduce losses more than one with marginally higher AUC.

Capital One's data warehouse uses a star schema. In this context, what is the role of a fact table?

Answer: Stores quantitative business metrics (transactions, amounts, counts) with foreign keys to dimension tables

Fact tables hold measurable business events and metrics with foreign keys linking to dimension tables that describe those events.

A logistic regression model for credit approval returns a probability of 0.73 for a customer. With a decision threshold of 0.60, what is the model's prediction?

Answer: Approve — 0.73 exceeds the 0.60 threshold

When the predicted probability exceeds the decision threshold (0.73 > 0.60), the model classifies the outcome as the positive class (approve).

Which SQL clause correctly calculates the percentage of total spend each category represents in a single query without a subquery?

Answer: SUM(amount) / SUM(amount) OVER () * 100 AS pct_of_total

A window function SUM() OVER () calculates the grand total in the same query, enabling single-pass percentage computation.

In Capital One's risk management, a Monte Carlo simulation is used to model credit loss distributions. What is the primary advantage of this technique over a single-point estimate?

Answer: It quantifies the full range of possible outcomes and their probabilities, capturing tail risk

Monte Carlo simulation samples from probability distributions thousands of times to produce a loss distribution, revealing tail risk that single-point estimates miss.