Classification: Classification is the most commonly applied data mining technique, which employs a set of preclassified
examples to develop a model that can classify the population of records at large. Fraud detection and credit
risk applications are particularly well suited to this type of analysis. This approach frequently employs decision tree
or neural network-based classification algorithms. The data classification process involves learning and
classification. In Learning the training data are analyzed by classification algorithm. In classification test data are
used to estimate the accuracy of the classification rules. If the accuracy is acceptable the rules can be applied to the
new data tuples. For a fraud detection application, this would include complete records of both fraudulent and valid
activities determined on a record-by-record basis. The classifier-training algorithm uses these pre-classified
examples to determine the set of parameters required for proper discrimination. The algorithm then encodes these
parameters into a model called a classifier. Some well-known classification models are