A data science team is building a model to detect fraudulent transactions. They have a dataset of 1 million normal transactions and 1,000 fraudulent ones. What is the MOST effective data preparation step to handle this imbalance?
SMOTE creates synthetic fraud samples, and undersampling reduces the majority class, creating a more balanced dataset.
Why this answer
Combining oversampling of the minority class (e.g., SMOTE) with undersampling of the majority class is a common and effective approach to balance the dataset.