Soft computing techniques applied to finance

Soft computing is progressively gaining presence in the financial world. The number of real and potential applications is very large and, accordingly, so is the presence of applied research papers in the literature. The aim of this paper is both to present relevant application areas, and to serve as an introduction to the subject. This paper provides arguments that justify the growing interest in these techniques among the financial community and introduces domains of application such as stock and currency market prediction, trading, portfolio management, credit scoring or financial distress prediction areas.Publicad

Neural Networks in Bankruptcy Prediction - A Comparative Study on the Basis of the First Hungarian Bankruptcy Model

The article attempts to answer the question whether or not the latest bankruptcy prediction techniques are more reliable than traditional mathematical–statistical ones in Hungary. Simulation experiments carried out on the database of the first Hungarian bankruptcy prediction model clearly prove that bankruptcy models built using artificial neural networks have higher classification accuracy than models created in the 1990s based on discriminant analysis and logistic regression analysis. The article presents the main results, analyses the reasons for the differences and presents constructive proposals concerning the further development of Hungarian bankruptcy prediction

Bankruptcy Prediction: A Comparison of Some Statistical and Machine Learning Techniques

We are interested in forecasting bankruptcies in a probabilistic way. Specifically, we compare the classification performance of several statistical and machine-learning techniques, namely discriminant analysis (Altman's Z-score), logistic regression, least-squares support vector machines and different instances of Gaussian processes (GP's) -that is GP's classifiers, Bayesian Fisher discriminant and Warped GP's. Our contribution to the field of computational finance is to introduce GP's as a potentially competitive probabilistic framework for bankruptcy prediction. Data from the repository of information of the US Federal Deposit Insurance Corporation is used to test the predictions.Bankruptcy prediction, Artificial intelligence, Supervised learning, Gaussian processes, Z-score.

Big data analytics:Computational intelligence techniques and application areas

Big Data has significant impact in developing functional smart cities and supporting modern societies. In this paper, we investigate the importance of Big Data in modern life and economy, and discuss challenges arising from Big Data utilization. Different computational intelligence techniques have been considered as tools for Big Data analytics. We also explore the powerful combination of Big Data and Computational Intelligence (CI) and identify a number of areas, where novel applications in real world smart city problems can be developed by utilizing these powerful tools and techniques. We present a case study for intelligent transportation in the context of a smart city, and a novel data modelling methodology based on a biologically inspired universal generative modelling approach called Hierarchical Spatial-Temporal State Machine (HSTSM). We further discuss various implications of policy, protection, valuation and commercialization related to Big Data, its applications and deployment

Company bankruptcy prediction framework based on the most influential features using XGBoost and stacking ensemble learning

Company bankruptcy is often a very big problem for companies. The impact of bankruptcy can cause losses to elements of the company such as owners, investors, employees, and consumers. One way to prevent bankruptcy is to predict the possibility of bankruptcy based on the company's financial data. Therefore, this study aims to find the best predictive model or method to predict company bankruptcy using the dataset from Polish companies bankruptcy. The prediction analysis process uses the best feature selection and ensemble learning. The best feature selection is selected using feature importance to XGBoost with a weight value filter of 10. The ensemble learning method used is stacking. Stacking is composed of the base model and meta learner. The base model consists of K-nearest neighbor, decision tree, SVM, and random forest, while the meta learner used is LightGBM. The stacking model accuracy results can outperform the base model accuracy with an accuracy rate of 97%

GPPE: a method to generate ad-hoc feature extractors for prediction in financial domains

When dealing with classification and regression problems, there is a strong need for high-quality attributes. This is a capital issue not only in financial problems, but in many Data Mining domains. Constructive Induction methods help to overcome this problem by mapping the original representation into a new one, where prediction becomes easier. In this work we present GPPE: a GP-based method that projects data from an original data space into another one where data approaches linear behavior (linear separability or linear regression). Also, GPPE is able to reduce the dimensionality of the problem by recombining related attributes and discarding irrelevant ones. We have applied GPPE to two financial domains: Bankruptcy prediction and IPO Underpricing prediction. In both cases GPPE automatically generated a new data representation that obtained competitive prediction rates and drastically reduced the dimensionality of the problem.Publicad