4,309 research outputs found
Data mining for detecting Bitcoin Ponzi schemes
Soon after its introduction in 2009, Bitcoin has been adopted by
cyber-criminals, which rely on its pseudonymity to implement virtually
untraceable scams. One of the typical scams that operate on Bitcoin are the
so-called Ponzi schemes. These are fraudulent investments which repay users
with the funds invested by new users that join the scheme, and implode when it
is no longer possible to find new investments. Despite being illegal in many
countries, Ponzi schemes are now proliferating on Bitcoin, and they keep
alluring new victims, who are plundered of millions of dollars. We apply data
mining techniques to detect Bitcoin addresses related to Ponzi schemes. Our
starting point is a dataset of features of real-world Ponzi schemes, that we
construct by analysing, on the Bitcoin blockchain, the transactions used to
perform the scams. We use this dataset to experiment with various machine
learning algorithms, and we assess their effectiveness through standard
validation protocols and performance metrics. The best of the classifiers we
have experimented can identify most of the Ponzi schemes in the dataset, with a
low number of false positives
Ensemble of Example-Dependent Cost-Sensitive Decision Trees
Several real-world classification problems are example-dependent
cost-sensitive in nature, where the costs due to misclassification vary between
examples and not only within classes. However, standard classification methods
do not take these costs into account, and assume a constant cost of
misclassification errors. In previous works, some methods that take into
account the financial costs into the training of different algorithms have been
proposed, with the example-dependent cost-sensitive decision tree algorithm
being the one that gives the highest savings. In this paper we propose a new
framework of ensembles of example-dependent cost-sensitive decision-trees. The
framework consists in creating different example-dependent cost-sensitive
decision trees on random subsamples of the training set, and then combining
them using three different combination approaches. Moreover, we propose two new
cost-sensitive combination approaches; cost-sensitive weighted voting and
cost-sensitive stacking, the latter being based on the cost-sensitive logistic
regression method. Finally, using five different databases, from four
real-world applications: credit card fraud detection, churn modeling, credit
scoring and direct marketing, we evaluate the proposed method against
state-of-the-art example-dependent cost-sensitive techniques, namely,
cost-proportionate sampling, Bayes minimum risk and cost-sensitive decision
trees. The results show that the proposed algorithms have better results for
all databases, in the sense of higher savings.Comment: 13 pages, 6 figures, Submitted for possible publicatio
Stacked Generalizations in Imbalanced Fraud Data Sets using Resampling Methods
This study uses stacked generalization, which is a two-step process of
combining machine learning methods, called meta or super learners, for
improving the performance of algorithms in step one (by minimizing the error
rate of each individual algorithm to reduce its bias in the learning set) and
then in step two inputting the results into the meta learner with its stacked
blended output (demonstrating improved performance with the weakest algorithms
learning better). The method is essentially an enhanced cross-validation
strategy. Although the process uses great computational resources, the
resulting performance metrics on resampled fraud data show that increased
system cost can be justified. A fundamental key to fraud data is that it is
inherently not systematic and, as of yet, the optimal resampling methodology
has not been identified. Building a test harness that accounts for all
permutations of algorithm sample set pairs demonstrates that the complex,
intrinsic data structures are all thoroughly tested. Using a comparative
analysis on fraud data that applies stacked generalizations provides useful
insight needed to find the optimal mathematical formula to be used for
imbalanced fraud data sets.Comment: 19 pages, 3 figures, 8 table
Handling class imbalance in credit card fraud using resampling methods
Credit card based online payments has grown intensely, compelling the financial organisations to implement and continuously improve their fraud detection system. However, credit card fraud dataset is heavily imbalanced and different types of misclassification errors may have different costs and it is essential to control them, to a certain degree, to compromise those errors. Classification techniques are the promising solutions to detect the fraud and non-fraud transactions. Unfortunately, in a certain condition, classification techniques do not perform well when it comes to huge numbers of differences in minority and majority cases. Hence in this study, resampling methods, Random Under Sampling, Random Over Sampling and Synthetic Minority Oversampling Technique, were applied in the credit card dataset to overcome the rare events in the dataset. Then, the three resampled datasets were classified using classification techniques. The performances were measured by their sensitivity, specificity, accuracy, precision, area under curve (AUC) and error rate. The findings disclosed that by resampling the dataset, the models were more practicable, gave better performance and were statistically better
Comparative Analysis of Different Distributions Dataset by Using Data Mining Techniques on Credit Card Fraud Detection
Banks suffer multimillion-dollars losses each year for several reasons, the most important of which is due to credit card fraud. The issue is how to cope with the challenges we face with this kind of fraud. Skewed "class imbalance" is a very important challenge that faces this kind of fraud. Therefore, in this study, we explore four data mining techniques, namely naïve Bayesian (NB),Support Vector Machine (SVM), K-Nearest Neighbor (KNN) and Random Forest (RF), on actual credit card transactions from European cardholders. This paper offers four major contributions. First, we used under-sampling to balance the dataset because of the high imbalance class, implying skewed distribution. Second, we applied NB, SVM, KNN, and RF to under-sampled class to classify the transactions into fraudulent and genuine followed by testing the performance measures using a confusion matrix and comparing them. Third, we adopted cross-validation (CV) with 10 folds to test the accuracy of the four models with a standard deviation followed by comparing the results for all our models. Next, we examined these models against the entire dataset (skewed) using the confusion matrix and AUC (Area Under the ROC Curve) ranking measure to conclude the final results to determine which would be the best model for us to use with a particular type of fraud. The results showing the best accuracy for the NB, SVM, KNN and RF classifiers are 97,80%; 97,46%; 98,16% and 98,23%, respectively. The comparative results have been done by using four-division datasets (75:25), (90:10), (66:34) and (80:20) displayed that the RF performs better than NB, SVM, and KNN, and the results when utilizing our proposed models on the entire dataset (skewed), achieved preferable outcomes to the under-sampled dataset
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