Support Vector Machines (SVM) as a Technique for Solvency Analysis

This paper introduces a statistical technique, Support Vector Machines (SVM), which is considered by the Deutsche Bundesbank as an alternative for company rating. A special attention is paid to the features of the SVM which provide a higher accuracy of company classification into solvent and insolvent. The advantages and disadvantages of the method are discussed. The comparison of the SVM with more traditional approaches such as logistic regression (Logit) and discriminant analysis (DA) is made on the Deutsche Bundesbank data of annual income statements and balance sheets of German companies. The out-of-sample accuracy tests confirm that the SVM outperforms both DA and Logit on bootstrapped samples.Company rating, bankruptcy analysis, support vector machines

IMPROVED SUPPORT VECTOR MACHINE PERFORMANCE USING PARTICLE SWARM OPTIMIZATION IN CREDIT RISK CLASSIFICATION

In Classification using Support Vector Machine (SVM), each kernel has parameters that affect the classification accuracy results. This study examines the improvement of SVM performance by selecting parameters using Particle Swarm Optimization (PSO) on credit risk classification, the results of which are compared with SVM with random parameter selection. The classification performance is evaluated by applying the SVM classification to the Credit German benchmark credit data set and the private credit data set which is a credit data set issued from a local bank in North Sumatra. Although it requires a longer execution time to achieve optimal accuracy values, the SVM+PSO combination is quite effective and more systematic than trial and error techniques in finding SVM parameter values, so as to produce better accuracy. In general, the test results show that the RBF kernel is able to produce higher accuracy and f1-scores than linear and polynomial kernels. SVM classification with optimization using PSO can produce better accuracy than classification using SVM without optimization, namely the determination of parameters randomly. Credit data classification accuracy increased to 92.31%

Predicting MoRFs in protein sequences using HMM profiles

Background: Intrinsically Disordered Proteins (IDPs) lack an ordered three-dimensional structure and are enriched in various biological processes. The Molecular Recognition Features (MoRFs) are functional regions within IDPs that undergo a disorder-to-order transition on binding to a partner protein. Identifying MoRFs in IDPs using computational methods is a challenging task. Methods: In this study, we introduce hidden Markov model (HMM) profiles to accurately identify the location of MoRFs in disordered protein sequences. Using windowing technique, HMM profiles are utilised to extract features from protein sequences and support vector machines (SVM) are used to calculate a propensity score for each residue. Two different SVM kernels with high noise tolerance are evaluated with a varying window size and the scores of the SVM models are combined to generate the final propensity score to predict MoRF residues. The SVM models are designed to extract maximal information between MoRF residues, its neighboring regions (Flanks) and the remainder of the sequence (Others). Results: To evaluate the proposed method, its performance was compared to that of other MoRF predictors; MoRFpred and ANCHOR. The results show that the proposed method outperforms these two predictors. Conclusions: Using HMM profile as a source of feature extraction, the proposed method indicates improvement in predicting MoRFs in disordered protein sequence

Supervised Classification and Mathematical Optimization

Data Mining techniques often ask for the resolution of optimization problems. Supervised Classification, and, in particular, Support Vector Machines, can be seen as a paradigmatic instance. In this paper, some links between Mathematical Optimization methods and Supervised Classification are emphasized. It is shown that many different areas of Mathematical Optimization play a central role in off-the-shelf Supervised Classification methods. Moreover, Mathematical Optimization turns out to be extremely useful to address important issues in Classification, such as identifying relevant variables, improving the interpretability of classifiers or dealing with vagueness/noise in the data

Feature selection in a credit scoring model

This article belongs to the Special Issue Mathematics and Mathematical Physics Applied to Financial Markets.This paper proposes different classification algorithms—logistic regression, support vector machine, K-nearest neighbors, and random forest—in order to identify which candidates are likely to default for a credit scoring model. Three different feature selection methods are used in order to mitigate the overfitting in the curse of dimensionality of these classification algorithms: one filter method (Chi-squared test and correlation coefficients) and two wrapper methods (forward stepwise selection and backward stepwise selection). The performances of these three methods are discussed using two measures, the mean absolute error and the number of selected features. The methodology is applied for a valuable database of Taiwan. The results suggest that forward stepwise selection yields superior performance in each one of the classification algorithms used. The conclusions obtained are related to those in the literature, and their managerial implications are analyzed

A literature review on the application of evolutionary computing to credit scoring

The last years have seen the development of many credit scoring models for assessing the creditworthiness of loan applicants. Traditional credit scoring methodology has involved the use of statistical and mathematical programming techniques such as discriminant analysis, linear and logistic regression, linear and quadratic programming, or decision trees. However, the importance of credit grant decisions for financial institutions has caused growing interest in using a variety of computational intelligence techniques. This paper concentrates on evolutionary computing, which is viewed as one of the most promising paradigms of computational intelligence. Taking into account the synergistic relationship between the communities of Economics and Computer Science, the aim of this paper is to summarize the most recent developments in the application of evolutionary algorithms to credit scoring by means of a thorough review of scientific articles published during the period 2000–2012.This work has partially been supported by the Spanish Ministry of Education and Science under grant TIN2009-14205 and the Generalitat Valenciana under grant PROMETEO/2010/028

Supervised classification and mathematical optimization

Data Mining techniques often ask for the resolution of optimization problems. Supervised Classification, and, in particular, Support Vector Machines, can be seen as a paradigmatic instance. In this paper, some links between Mathematical Optimization methods and Supervised Classification are emphasized. It is shown that many different areas of Mathematical Optimization play a central role in off-the-shelf Supervised Classification methods. Moreover, Mathematical Optimization turns out to be extremely useful to address important issues in Classification, such as identifying relevant variables, improving the interpretability of classifiers or dealing with vagueness/noise in the data.Ministerio de Ciencia e InnovaciónJunta de Andalucí

MINING MULTI-GRANULAR MULTIVARIATE MEDICAL MEASUREMENTS

This thesis is motivated by the need to predict the mortality of patients in the Intensive Care Unit. The heart of this problem revolves around being able to accurately classify multivariate, multi-granular time series patient data. The approach ultimately taken in this thesis involves using Z-Score normalization to make variables comparable, Single Value Decomposition to reduce the number of features, and a Support Vector Machine to classify patient tuples. This approach proves to outperform other classification models such as k-Nearest Neighbor and demonstrates that SVM is a viable model for this project. The hope is that going forward other work can build off of this research and one day make an impact in the medical community