In this video we will be discussing about setting the probability level before we start this concept. As you all know that in logistic regression our dependent variable is calculating the probability for Y equals three even and our independent variables can be categorical or continuous in it so in order to set the carpentry ability level logistic regression estimates the probability of an event the dependent variable for logistic regression is converted to a response variable using the cut point probability level. Every company before building a model says this probability level such that if the predicted probability is greater than the cut point level, then it's denoted as an event otherwise it is a non event. The response variable becomes a variable taking binary values that is zero or one. So basically, my dependent variable in logistic regression is calculus. probability for Y equals three even and the probability value lies between zero and one now, this dependent variable is come is converted to a response variable and this response variable will take value either zero or it will take value one and to convert the dependent variable to response variable we said the carpentry ability level Now, let me explain you all the concept of setting the carpenter priority level using an example suppose we are doing credit fiscal antics without data.

So, in case of credit risk analysis may probability by equals to event is saved that the loan will be repaid by the customer on the right things the probability by equal to event is the customer will repay the loan at right thing and probability y equals to zero that is known event is relative to non event is the customer will not repay the loan on the right date. Now, the company will set a carbon priority level say the company has said the carpenter average level is point five so, after the company has fitted the data loss to regression model, the company has predicted the proverbial Pol y equals to evil Now, if the predicted probability is greater than the carpenter ability level which in our example we have considered as point five then we will see the response variable will be equal to one that is say event will occur and if it is less than point five then my response variable will be zero that is the event will not occur it will be a non event So, in this way we will be converting the dependent variable to our response variable taking binary values either zero or one.

So, in this video we will be learning 10 here. So, for now, let's end this video over here. We'll see you all for the next video. Goodbye and thank you