Forecasting Long-Term Government Bond Yields: An Application of Statistical and AI Models

This paper evaluates several artificial intelligence and classical algorithms on their ability of forecasting the monthly yield of the US 10-year Treasury bonds from a set of four economic indicators. Due to the complexity of the prediction problem, the task represents a challenging test for the algorithms under evaluation. At the same time, the study is of particular significance for the important and paradigmatic role played by the US market in the world economy. Four data-driven artificial intelligence approaches are considered, namely, a manually built fuzzy logic model, a machine learned fuzzy logic model, a self-organising map model and a multi-layer perceptron model. Their performance is compared with the performance of two classical approaches, namely, a statistical ARIMA model and an econometric error correction model. The algorithms are evaluated on a complete series of end-month US 10-year Treasury bonds yields and economic indicators from 1986:1 to 2004:12. In terms of prediction accuracy and reliability of the modelling procedure, the best results are obtained by the three parametric regression algorithms, namely the econometric, the statistical and the multi-layer perceptron model. Due to the sparseness of the learning data samples, the manual and the automatic fuzzy logic approaches fail to follow with adequate precision the range of variations of the US 10-year Treasury bonds. For similar reasons, the self-organising map model gives an unsatisfactory performance. Analysis of the results indicates that the econometric model has a slight edge over the statistical and the multi-layer perceptron models. This suggests that pure data-driven induction may not fully capture the complicated mechanisms ruling the changes in interest rates. Overall, the prediction accuracy of the best models is only marginally better than the prediction accuracy of a basic one-step lag predictor. This result highlights the difficulty of the modelling task and, in general, the difficulty of building reliable predictors for financial markets.interest rates; forecasting; neural networks; fuzzy logic.

Shallow and deep networks intrusion detection system : a taxonomy and survey

Intrusion detection has attracted a considerable interest from researchers and industries. The community, after many years of research, still faces the problem of building reliable and efficient IDS that are capable of handling large quantities of data, with changing patterns in real time situations. The work presented in this manuscript classifies intrusion detection systems (IDS). Moreover, a taxonomy and survey of shallow and deep networks intrusion detection systems is presented based on previous and current works. This taxonomy and survey reviews machine learning techniques and their performance in detecting anomalies. Feature selection which influences the effectiveness of machine learning (ML) IDS is discussed to explain the role of feature selection in the classification and training phase of ML IDS. Finally, a discussion of the false and true positive alarm rates is presented to help researchers model reliable and efficient machine learning based intrusion detection systems

Forecasting long-term government bond yields: an application of statistical and ai models

This paper evaluates several artificial intelligence and classical algorithms on their ability of forecasting the monthly yield of the US 10-year Treasury bonds from a set of four economic indicators. Due to the complexity of the prediction problem, the task represents a challenging test for the algorithms under evaluation. At the same time, the study is of particular significance for the important and paradigmatic role played by the US market in the world economy. Four data-driven artificial intelligence approaches are considered, namely, a manually built fuzzy logic model, a machine learned fuzzy logic model, a self-organising map model and a multi-layer perceptron model. Their performance is compared with the performance of two classical approaches, namely, a statistical ARIMA model and an econometric error correction model. The algorithms are evaluated on a complete series of end-month US 10-year Treasury bonds yields and economic indicators from 1986:1 to 2004:12. In terms of prediction accuracy and reliability of the modelling procedure, the best results are obtained by the three parametric regression algorithms, namely the econometric, the statistical and the multi-layer perceptron model. Due to the sparseness of the learning data samples, the manual and the automatic fuzzy logic approaches fail to follow with adequate precision the range of variations of the US 10-year Treasury bonds. For similar reasons, the self-organising map model gives an unsatisfactory performance. Analysis of the results indicates that the econometric model has a slight edge over the statistical and the multi-layer perceptron models. This suggests that pure data-driven induction may not fully capture the complicated mechanisms ruling the changes in interest rates. Overall, the prediction accuracy of the best models is only marginally better than the prediction accuracy of a basic one-step lag predictor. This result highlights the difficulty of the modelling task and, in general, the difficulty of building reliable predictors for financial markets

Modular Machine Learning Methods for Computer-Aided Diagnosis of Breast Cancer

The purpose of this study was to improve breast cancer diagnosis by reducing the number of benign biopsies performed. To this end, we investigated modular and ensemble systems of machine learning methods for computer-aided diagnosis (CAD) of breast cancer. A modular system partitions the input space into smaller domains, each of which is handled by a local model. An ensemble system uses multiple models for the same cases and combines the models\u27 predictions. Five supervised machine learning techniques (LDA, SVM, BP-ANN, CBR, CART) were trained to predict the biopsy outcome from mammographic findings (BIRADS™) and patient age based on a database of 2258 cases mixed from multiple institutions. The generalization of the models was tested on second set of 2177 cases. Clusters were identified in the database using a priori knowledge and unsupervised learning methods (agglomerative hierarchical clustering followed by K-Means, SOM, AutoClass). The performance of the global models over the clusters was examined and local models were trained for clusters. While some local models were superior to some global models, we were unable to build a modular CAD system that was better than the global BP-ANN model. The ensemble systems based on simplistic combination schemes did not result in significant improvements and more complicated combination schemes were found to be unduly optimistic. One of the most striking results of this dissertation was that CAD systems trained on a mixture of lesion types performed much better on masses than on calcifications. Our study of the institutional effects suggests that models built on cases mixed between institutions may overcome some of the weaknesses of models built on cases from a single institution. It was suggestive that each of the unsupervised methods identified a cluster of younger women with well-circumscribed or obscured, oval-shaped masses that accounted for the majority of the BP-ANN’s recommendations for follow up. From the cluster analysis and the CART models, we determined a simple diagnostic rule that performed comparably to the global BP-ANN. Approximately 98% sensitivity could be maintained while providing approximately 26% specificity. This should be compared to the clinical status quo of 100% sensitivity and 0% specificity on this database of indeterminate cases already referred to biopsy