Information gain directed genetic algorithm wrapper feature selection for credit rating

Financial credit scoring is one of the most crucial processes in the finance industry sector to be able to assess the credit-worthiness of individuals and enterprises. Various statistics-based machine learning techniques have been employed for this task. “Curse of Dimensionality” is still a significant challenge in machine learning techniques. Some research has been carried out on Feature Selection (FS) using genetic algorithm as wrapper to improve the performance of credit scoring models. However, the challenge lies in finding an overall best method in credit scoring problems and improving the time-consuming process of feature selection. In this study, the credit scoring problem is investigated through feature selection to improve classification performance. This work proposes a novel approach to feature selection in credit scoring applications, called as Information Gain Directed Feature Selection algorithm (IGDFS), which performs the ranking of features based on information gain, propagates the top m features through the GA wrapper (GAW) algorithm using three classical machine learning algorithms of KNN, Naïve Bayes and Support Vector Machine (SVM) for credit scoring. The first stage of information gain guided feature selection can help reduce the computing complexity of GA wrapper, and the information gain of features selected with the IGDFS can indicate their importance to decision making

Data mining in computational finance

Computational finance is a relatively new discipline whose birth can be traced back to early 1950s. Its major objective is to develop and study practical models focusing on techniques that apply directly to financial analyses. The large number of decisions and computationally intensive problems involved in this discipline make data mining and machine learning models an integral part to improve, automate, and expand the current processes. One of the objectives of this research is to present a state-of-the-art of the data mining and machine learning techniques applied in the core areas of computational finance. Next, detailed analysis of public and private finance datasets is performed in an attempt to find interesting facts from data and draw conclusions regarding the usefulness of features within the datasets. Credit risk evaluation is one of the crucial modern concerns in this field. Credit scoring is essentially a classification problem where models are built using the information about past applicants to categorise new applicants as ‘creditworthy’ or ‘non-creditworthy’. We appraise the performance of a few classical machine learning algorithms for the problem of credit scoring. Typically, credit scoring databases are large and characterised by redundant and irrelevant features, making the classification task more computationally-demanding. Feature selection is the process of selecting an optimal subset of relevant features. We propose an improved information-gain directed wrapper feature selection method using genetic algorithms and successfully evaluate its effectiveness against baseline and generic wrapper methods using three benchmark datasets. One of the tasks of financial analysts is to estimate a company’s worth. In the last piece of work, this study predicts the growth rate for earnings of companies using three machine learning techniques. We employed the technique of lagged features, which allowed varying amounts of recent history to be brought into the prediction task, and transformed the time series forecasting problem into a supervised learning problem. This work was applied on a private time series dataset

Transfer Learning with Label Adaptation for Counterparty Rating Prediction

Credit rating is one of the core tools for risk management within financial firms. Ratings are usually provided by specialized agencies which perform an overall study and diagnosis on a given firm’s financial health. Dealing with unrated entities is a common problem, as several risk models rely on the ratings’ completeness, and agencies can not realistically rate every existing company. To solve this, credit rating prediction has been widely studied in academia. However, research in this topic tends to separate models amongst the different rating agencies due to the difference in both rating scales and composition. This work uses transfer learning, via label adaptation, to increase the number of samples for feature selection, and appends these adapted labels as an additional feature to improve the predictive power and stability of previously proposed methods. Accuracy on exact label prediction was improved from 0.30, in traditional models, up to 0.33 in the transfer learning setting. Furthermore, when measuring accuracy with a tolerance of 3 grade notches, accuracy increased almost 0.10, from 0.87 to 0.96. Overall, transfer learning displayed better out-of-sample generalization

Improvement on KNN using genetic algorithm and combined feature extraction to identify COVID-19 sufferers based on CT scan image

Coronavirus disease 2019 (COVID-19) has spread throughout the world. The detection of this disease is usually carried out using the reverse transcriptase polymerase chain reaction (RT-PCR) swab test. However, limited resources became an obstacle to carrying out the massive test. To solve this problem, computerized tomography (CT) scan images are used as one of the solutions to detect the sufferer. This technique has been used by researchers but mostly using classifiers that required high resources, such as convolutional neural network (CNN). In this study, we proposed a way to classify the CT scan images by using the more efficient classifier, k-nearest neighbors (KNN), for images that are processed using a combination of these feature extraction methods, Haralick, histogram, and local binary pattern. Genetic algorithm is also used for feature selection. The results showed that the proposed method was able to improve KNN performance, with the best accuracy of 93.30% for the combination of Haralick and local binary pattern feature extraction, and the best area under the curve (AUC) for the combination of Haralick, histogram, and local binary pattern with a value of 0.948. The best accuracy of our models also outperforms CNN by a 4.3% margin

Using neural networks and support vector machines for default prediction in South Africa

A thesis submitted to the Faculty of Computer Science and Applied Mathematics, University of Witwatersrand, in fulfillment of the requirements for the Master of Science (MSc) Johannesburg Feb 2017This is a thesis on credit risk and in particular bankruptcy prediction. It investigates the application of machine learning techniques such as support vector machines and neural networks for this purpose. This is not a thesis on support vector machines and neural networks, it simply looks at using these functions as tools to preform the analysis. Neural networks are a type of machine learning algorithm. They are nonlinear mod- els inspired from biological network of neurons found in the human central nervous system. They involve a cascade of simple nonlinear computations that when aggre- gated can implement robust and complex nonlinear functions. Neural networks can approximate most nonlinear functions, making them a quite powerful class of models. Support vector machines (SVM) are the most recent development from the machine learning community. In machine learning, support vector machines (SVMs) are su- pervised learning algorithms that analyze data and recognize patterns, used for clas- si cation and regression analysis. SVM takes a set of input data and predicts, for each given input, which of two possible classes comprises the input, making the SVM a non-probabilistic binary linear classi er. A support vector machine constructs a hyperplane or set of hyperplanes in a high or in nite dimensional space, which can be used for classi cation into the two di erent data classes. Traditional bankruptcy prediction medelling has been criticised as it makes certain underlying assumptions on the underlying data. For instance, a frequent requirement for multivarate analysis is a joint normal distribution and independence of variables. Support vector machines (and neural networks) are a useful tool for default analysis because they make far fewer assumptions on the underlying data. In this framework support vector machines are used as a classi er to discriminate defaulting and non defaulting companies in a South African context. The input data required is a set of nancial ratios constructed from the company's historic nancial statements. The data is then Divided into the two groups: a company that has defaulted and a company that is healthy (non default). The nal data sample used for this thesis consists of 23 nancial ratios from 67 companies listed on the jse. Furthermore for each company the company's probability of default is predicted. The results are benchmarked against more classical methods that are commonly used for bankruptcy prediction such as linear discriminate analysis and logistic regression. Then the results of the support vector machines, neural networks, linear discriminate analysis and logistic regression are assessed via their receiver operator curves and pro tability ratios to gure out which model is more successful at predicting default.MT 201

A Robust Intuitionistic Fuzzy Constraint Score based Potential Feature Subset Selection for Chronic Diseases Detection

This work proposes a novel feature selection algorithm for high-dimensional features in real-time datasets for prediction or classification. Conventional methods assume dataset values as crisp formats, but in real datasets, instances are represented in linguistic formats, requiring the use of uncertainty theories. The Intuitionistic Fuzzy Similarity based constraint score is proposed, where each feature is denoted as an independent variable and the class variable as a dependent variable. The features are represented in triplet form, with grade of belongingness, non-belongingness, and hesitancy index to maximize relevancy and reduce redundancy. Pairwise similarity matching is computed using Intuitionistic fuzzy similarity distance measure for supervised learning and intuitionistic fuzzy K-NN for semi-supervised learning. Potential feature subsets are selected and validated using deep learning algorithms. The results show that the proposed Intuitionistic fuzzy Constraint score feature selection algorithm produces optimal results compared to other state-of-the-art methods in chronic disease prediction

Memetic micro-genetic algorithms for cancer data classification

Fast and precise medical diagnosis of human cancer is crucial for treatment decisions. Gene selection consists of identifying a set of informative genes from microarray data to allow high predictive accuracy in human cancer classification. This task is a combinatorial search problem, and optimisation methods can be applied for its resolution. In this paper, two memetic micro-genetic algorithms (MμV1 and MμV2) with different hybridisation approaches are proposed for feature selection of cancer microarray data. Seven gene expression datasets are used for experimentation. The comparison with stochastic state-of-the-art optimisation techniques concludes that problem-dependent local search methods combined with micro-genetic algorithms improve feature selection of cancer microarray data.Fil: Rojas, Matias Gabriel. Universidad Nacional de Lujan. Centro de Investigacion Docencia y Extension En Tecnologias de la Informacion y Las Comunicaciones.; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Mendoza; ArgentinaFil: Olivera, Ana Carolina. Universidad Nacional de Cuyo. Facultad de Ingeniería; Argentina. Universidad Nacional de Lujan. Centro de Investigacion Docencia y Extension En Tecnologias de la Informacion y Las Comunicaciones.; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Mendoza; ArgentinaFil: Carballido, Jessica Andrea. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Ciencias e Ingeniería de la Computación; ArgentinaFil: Vidal, Pablo Javier. Universidad Nacional de Cuyo. Facultad de Ingeniería; Argentina. Universidad Nacional del Sur. Departamento de Ciencias e Ingeniería de la Computación; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Mendoza; Argentin

Advanced feature selection to study the internationalization strategy of enterprises

Firms face an increasingly complex economic and financial environment in which the access to international networks and markets is crucial. To be successful, companies need to understand the role of internationalization determinants such as bilateral psychic distance, experience, etc. Cutting-edge feature selection methods are applied in the present paper and compared to previous results to gain deep knowledge about strategies for Foreign Direct Investment. More precisely, evolutionary feature selection, addressed from the wrapper approach, is applied with two different classifiers as the fitness function: Bagged Trees and Extreme Learning Machines. The proposed intelligent system is validated when applied to real-life data from Spanish Multinational Enterprises (MNEs). These data were extracted from databases belonging to the Spanish Ministry of Industry, Tourism, and Trade. As a result, interesting conclusions are derived about the key features driving to the internationalization of the companies under study. This is the first time that such outcomes are obtained by an intelligent system on internationalization data.The work was conducted during the research stays of Álvaro Herrero and Roberto Alcalde at KEDGE Business School in Bordeaux (France

A Tent L\'evy Flying Sparrow Search Algorithm for Feature Selection: A COVID-19 Case Study

The "Curse of Dimensionality" induced by the rapid development of information science, might have a negative impact when dealing with big datasets. In this paper, we propose a variant of the sparrow search algorithm (SSA), called Tent L\'evy flying sparrow search algorithm (TFSSA), and use it to select the best subset of features in the packing pattern for classification purposes. SSA is a recently proposed algorithm that has not been systematically applied to feature selection problems. After verification by the CEC2020 benchmark function, TFSSA is used to select the best feature combination to maximize classification accuracy and minimize the number of selected features. The proposed TFSSA is compared with nine algorithms in the literature. Nine evaluation metrics are used to properly evaluate and compare the performance of these algorithms on twenty-one datasets from the UCI repository. Furthermore, the approach is applied to the coronavirus disease (COVID-19) dataset, yielding the best average classification accuracy and the average number of feature selections, respectively, of 93.47% and 2.1. Experimental results confirm the advantages of the proposed algorithm in improving classification accuracy and reducing the number of selected features compared to other wrapper-based algorithms

EGFAFS:A Novel Feature Selection Algorithm Based on Explosion Gravitation Field Algorithm

Feature selection (FS) is a vital step in data mining and machine learning, especially for analyzing the data in high-dimensional feature space. Gene expression data usually consist of a few samples characterized by high-dimensional feature space. As a result, they are not suitable to be processed by simple methods, such as the filter-based method. In this study, we propose a novel feature selection algorithm based on the Explosion Gravitation Field Algorithm, called EGFAFS. To reduce the dimensions of the feature space to acceptable dimensions, we constructed a recommended feature pool by a series of Random Forests based on the Gini index. Furthermore, by paying more attention to the features in the recommended feature pool, we can find the best subset more efficiently. To verify the performance of EGFAFS for FS, we tested EGFAFS on eight gene expression datasets compared with four heuristic-based FS methods (GA, PSO, SA, and DE) and four other FS methods (Boruta, HSICLasso, DNN-FS, and EGSG). The results show that EGFAFS has better performance for FS on gene expression data in terms of evaluation metrics, having more than the other eight FS algorithms. The genes selected by EGFAGS play an essential role in the differential co-expression network and some biological functions further demonstrate the success of EGFAFS for solving FS problems on gene expression data