Support Vector Machines for Credit Scoring and discovery of significant features

The assessment of risk of default on credit is important for financial institutions. Logistic regression and discriminant analysis are techniques traditionally used in credit scoring for determining likelihood to default based on consumer application and credit reference agency data. We test support vector machines against these traditional methods on a large credit card database. We find that they are competitive and can be used as the basis of a feature selection method to discover those features that are most significant in determining risk of default. 1

Modeling Financial Time Series with Artificial Neural Networks

Financial time series convey the decisions and actions of a population of human actors over time. Econometric and regressive models have been developed in the past decades for analyzing these time series. More recently, biologically inspired artificial neural network models have been shown to overcome some of the main challenges of traditional techniques by better exploiting the non-linear, non-stationary, and oscillatory nature of noisy, chaotic human interactions. This review paper explores the options, benefits, and weaknesses of the various forms of artificial neural networks as compared with regression techniques in the field of financial time series analysis.CELEST, a National Science Foundation Science of Learning Center (SBE-0354378); SyNAPSE program of the Defense Advanced Research Project Agency (HR001109-03-0001

DISCRIMINANT STEPWISE PROCEDURE

Stepwise procedure is now probably the most popular tool for automatic feature selection. In the most cases it represents model selection approach which evaluates various feature subsets (so called wrapper). In fact it is heuristic search technique which examines the space of all possible feature subsets. This method is known in the literature under different names and variants. We organize the concepts and terminology, and show several variants of stepwise feature selection from a search strategy point of view. Short review of implementations in R will be given

Pragmatic Ontology Evolution: Reconciling User Requirements and Application Performance

Increasingly, organizations are adopting ontologies to describe their large catalogues of items. These ontologies need to evolve regularly in response to changes in the domain and the emergence of new requirements. An important step of this process is the selection of candidate concepts to include in the new version of the ontology. This operation needs to take into account a variety of factors and in particular reconcile user requirements and application performance. Current ontology evolution methods focus either on ranking concepts according to their relevance or on preserving compatibility with existing applications. However, they do not take in consideration the impact of the ontology evolution process on the performance of computational tasks – e.g., in this work we focus on instance tagging, similarity computation, generation of recommendations, and data clustering. In this paper, we propose the Pragmatic Ontology Evolution (POE) framework, a novel approach for selecting from a group of candidates a set of concepts able to produce a new version of a given ontology that i) is consistent with the a set of user requirements (e.g., max number of concepts in the ontology), ii) is parametrised with respect to a number of dimensions (e.g., topological considerations), and iii) effectively supports relevant computational tasks. Our approach also supports users in navigating the space of possible solutions by showing how certain choices, such as limiting the number of concepts or privileging trendy concepts rather than historical ones, would reflect on the application performance. An evaluation of POE on the real-world scenario of the evolving Springer Nature taxonomy for editorial classification yielded excellent results, demonstrating a significant improvement over alternative approaches