Subscribe to the gold package and get unlimited access to Shamra Academy
Register a new userInvestigating bankruptcy prediction models in the presence of extreme class imbalance and multiple stages of economy
59
0
0.0
(
0
)
Ask ChatGPT about the research
No Arabic abstract
In the area of credit risk analytics, current Bankruptcy Prediction Models (BPMs) struggle with (a) the availability of comprehensive and real-world data sets and (b) the presence of extreme class imbalance in the data (i.e., very few samples for the minority class) that degrades the performance of the prediction model. Moreover, little research has compared the relative performance of well-known BPMs on public datasets addressing the class imbalance problem. In this work, we apply eight classes of well-known BPMs, as suggested by a review of decades of literature, on a new public dataset named Freddie Mac Single-Family Loan-Level Dataset with resampling (i.e., adding synthetic minority samples) of the minority class to tackle class imbalance. Additionally, we apply some recent AI techniques (e.g., tree-based ensemble techniques) that demonstrate potentially better results on models trained with resampled data. In addition, from the analysis of 19 years (1999-2017) of data, we discover that models behave differently when presented with sudden changes in the economy (e.g., a global financial crisis) resulting in abrupt fluctuations in the national default rate. In summary, this study should aid practitioners/researchers in determining the appropriate model with respect to data that contains a class imbalance and various economic stages.
rate research
Read More
Important tasks like record linkage and extreme classification demonstrate extreme class imbalance, with 1 minority instance to every 1 million or more majority instances. Obtaining a sufficient sample of all classes, even just to achieve statistically-significant evaluation, is so challenging that most current approaches yield poor estimates or incur impractical cost. Where importance sampling has been levied against this challenge, restrictive constraints are placed on performance metrics, estimates do not come with appropriate guarantees, or evaluations cannot adapt to incoming labels. This paper develops a framework for online evaluation based on adaptive importance sampling. Given a target performance metric and model for $p(y|x)$, the framework adapts a distribution over items to label in order to maximize statistical precision. We establish strong consistency and a central limit theorem for the resulting performance estimates, and instantiate our framework with worked examples that leverage Dirichlet-tree models. Experiments demonstrate an average MSE superior to state-of-the-art on fixed label budgets.
In analyses of rare-events, regardless of the domain of application, class-imbalance issue is intrinsic. Although the challenges are known to data experts, their explicit impact on the analytic and the decisions made based on the findings are often overlooked. This is in particular prevalent in interdisciplinary research where the theoretical aspects are sometimes overshadowed by the challenges of the application. To show-case these undesirable impacts, we conduct a series of experiments on a recently created benchmark data, named Space Weather ANalytics for Solar Flares (SWAN-SF). This is a multivariate time series dataset of magnetic parameters of active regions. As a remedy for the imbalance issue, we study the impact of data manipulation (undersampling and oversampling) and model manipulation (using class weights). Furthermore, we bring to focus the auto-correlation of time series that is inherited from the use of sliding window for monitoring flares history. Temporal coherence, as we call this phenomenon, invalidates the randomness assumption, thus impacting all sampling practices including different cross-validation techniques. We illustrate how failing to notice this concept could give an artificial boost in the forecast performance and result in misleading findings. Throughout this study we utilized Support Vector Machine as a classifier, and True Skill Statistics as a verification metric for comparison of experiments. We conclude our work by specifying the correct practice in each case, and we hope that this study could benefit researchers in other domains where time series of rare events are of interest.
Being able to predict the occurrence of extreme returns is important in financial risk management. Using the distribution of recurrence intervals---the waiting time between consecutive extremes---we show that these extreme returns are predictable on the short term. Examining a range of different types of returns and thresholds we find that recurrence intervals follow a $q$-exponential distribution, which we then use to theoretically derive the hazard probability $W(Delta t |t)$. Maximizing the usefulness of extreme forecasts to define an optimized hazard threshold, we indicates a financial extreme occurring within the next day when the hazard probability is greater than the optimized threshold. Both in-sample tests and out-of-sample predictions indicate that these forecasts are more accurate than a benchmark that ignores the predictive signals. This recurrence interval finding deepens our understanding of reoccurring extreme returns and can be applied to forecast extremes in risk management.
With the wide application of machine learning algorithms to the real world, class imbalance and concept drift have become crucial learning issues. Class imbalance happens when the data categories are not equally represented, i.e., at least one category is minority compared to other categories. It can cause learning bias towards the majority class and poor generalization. Concept drift is a change in the underlying distribution of the problem, and is a significant issue specially when learning from data streams. It requires learners to be adaptive to dynamic changes. Class imbalance and concept drift can significantly hinder predictive performance, and the problem becomes particularly challenging when they occur simultaneously. This challenge arises from the fact that one problem can affect the treatment of the other. For example, drift detection algorithms based on the traditional classification error may be sensitive to the imbalanced degree and become less effective; and class imbalance techniques need to be adaptive to changing imbalance rates, otherwise the class receiving the preferential treatment may not be the correct minority class at the current moment. Therefore, the mutual effect of class imbalance and concept drift should be considered during algorithm design. The aim of this workshop is to bring together researchers from the areas of class imbalance learning and concept drift in order to encourage discussions and new collaborations on solving the combined issue of class imbalance and concept drift. It provides a forum for international researchers and practitioners to share and discuss their original work on addressing new challenges and research issues in class imbalance learning, concept drift, and the combined issues of class imbalance and concept drift. The proceedings include 8 papers on these topics.
Representing entities and relations in an embedding space is a well-studied approach for machine learning on relational data. Existing approaches, however, primarily focus on improving accuracy and overlook other aspects such as robustness and interpretability. In this paper, we propose adversarial modifications for link prediction models: identifying the fact to add into or remove from the knowledge graph that changes the prediction for a target fact after the model is retrained. Using these single modifications of the graph, we identify the most influential fact for a predicted link and evaluate the sensitivity of the model to the addition of fake facts. We introduce an efficient approach to estimate the effect of such modifications by approximating the change in the embeddings when the knowledge graph changes. To avoid the combinatorial search over all possible facts, we train a network to decode embeddings to their corresponding graph components, allowing the use of gradient-based optimization to identify the adversarial modification. We use these techniques to evaluate the robustness of link prediction models (by measuring sensitivity to additional facts), study interpretability through the facts most responsible for predictions (by identifying the most influential neighbors), and detect incorrect facts in the knowledge base.
suggested questions
Log in to be able to interact and post comments
comments
Fetching comments
Sign in to be able to follow your search criteria
