Free GARP RAI Exam Questions

A trading firm uses reinforcement learning to determine the best time to buy or sell an asset. They have partial information about the state transitions and aim to maximize long-term profits by identifying the best action in each state. Which reinforcement learning approach is most suitable for this scenario?

A financial institution is developing a credit risk model using a machine learning algorithm. The data science team decides to split their dataset into three parts: training, validation, and test sets. What is the primary purpose of the validation set in this setup?

A financial services firm is using a neural network with multiple hidden layers to predict the likelihood of loan default (binary classification). They find that the model isn’t learning well with the logistic activation function in the hidden layers. Which activation function should they consider switching to improve learning?

Which type of risk might an organization face if an AI algorithm breaches individual privacy or yields biased results?

While using Naïve Bayes for text classification, a bank wants to classify customer feedback as “Good” or “Bad.” How does the model handle the probability of classifying feedback with words it hasn’t encountered?