scholarly journals Firms Default Prediction with Machine Learning

2020 ◽  
pp. 47-59
Author(s):  
Tesi Aliaj ◽  
Aris Anagnostopoulos ◽  
Stefano Piersanti
Keyword(s):  
Machine Learning ◽  
Default Prediction

Why segmentation matters: a Machine Learning approach for predicting loan defaults in the Peer-to-Peer (P2P) Financial Ecosystem

2021 ◽  
Vol 16 (2) ◽  
pp. 35-49
Author(s):  
Adamaria Perrotta ◽  
◽  
Georgios Bliatsios ◽  
Keyword(s):  
Machine Learning ◽  
Area Under The Curve ◽  
Peer To Peer ◽  
Weight Of Evidence ◽  
K Nearest Neighbors ◽  
Default Prediction ◽  
Sequential Feature Selection ◽  
Loan Defaults ◽  
The One ◽  
Online Lending

Peer-to-Peer (P2P) lending is an online lending process allowing individuals to obtain or concede loans without the interference of traditional financial intermediaries. It has grown quickly the last years, with some platforms reaching billions of dollars of loans in principal in a short amount of time. Since each loan is associated with the probability of loss due to a borrower's failure, this paper addresses the borrower's default prediction problem in the P2P financial ecosystem. The main assumption, which makes this study different from the available literature, is that borrowers sharing the same homeownership status display similar risk profile, thus a model per segment should be developed. We estimate the Probability of Default (PD) of a borrower by using Logistic Regression (LR) coupled with Weight of Evidence encoding. The features set is identified via the Sequential Feature Selection (SFS). We compare the forward against the backward SFS, in terms of the Area Under the Curve (AUC), and we choose the one that maximizes this statistic. Finally, we compare the results of the chosen LR approach against two other popular Machine Learning (ML) techniques: the k Nearest Neighbors (k-NN) and the Random Forest (RF).

scholarly journals Corporate Default Predictions Using Machine Learning: Literature Review

2020 ◽  
Vol 12 (16) ◽  
pp. 6325 ◽  
Author(s):  
Hyeongjun Kim ◽  
Hoon Cho ◽  
Doojin Ryu
Keyword(s):  
Machine Learning ◽  
Prediction Model ◽  
Statistical Models ◽  
Stock Price ◽  
Global Financial Crisis ◽  
Support Vector ◽  
Corporate Default ◽  
Default Prediction ◽  
Future Outcomes ◽  
The Global Financial Crisis

Corporate default predictions play an essential role in each sector of the economy, as highlighted by the global financial crisis and the increase in credit risk. This study reviews the corporate default prediction literature from the perspectives of financial engineering and machine learning. We define three generations of statistical models: discriminant analyses, binary response models, and hazard models. In addition, we introduce three representative machine learning methodologies: support vector machines, decision trees, and artificial neural network algorithms. For both the statistical models and machine learning methodologies, we identify the key studies used in corporate default prediction. By comparing these methods with findings from the interdisciplinary literature, our review suggests some new tasks in the field of machine learning for predicting corporate defaults. First, a corporate default prediction model should be a multi-period model in which future outcomes are affected by past decisions. Second, the stock price and the corporate value determined by the stock market are important factors to use in default predictions. Finally, a corporate default prediction model should be able to suggest the cause of default.

scholarly journals Emerging Approach for Detection of Financial Frauds Using Machine Learning

2021 ◽  
pp. 9-22
Author(s):  
Upasana Mukherjee ◽  
Vandana Thakkar ◽  
Shawni Dutta ◽  
Utsab Mukherjee ◽  
Samir Kumar Bandyopadhyay
Keyword(s):  
Machine Learning ◽  
Random Forest ◽  
Decision Tree ◽  
Credit Card ◽  
Fraud Detection ◽  
Loan Default ◽  
Credit Card Fraud ◽  
Detection Model ◽  
Default Prediction ◽  
Automated Process

The growth of regularly generated data from many financial activities has significant implications for every corner of financial modelling. This study has investigated the utilization of these continuous growing data by a means of an automated process. The automated process can be developed by using Machine learning based techniques that analyze the data and gain experience from the underlying data. Different important domains of financial fields such as Credit card fraud detection, bankruptcy detection, loan default prediction, investment prediction, marketing and many more can be modelled by implementing machine learning methods. Among several machine learning based techniques, the use of parametric and non-parametric based methods are approached by this research. Two parametric models namely Logistic Regression, Gaussian Naive Bayes models and two non-parametric methods such as Random Forest, Decision Tree are implemented in this paper. All the mentioned models are developed and implemented in the field of Credit card fraud detection, bankruptcy detection, loan default prediction. In each of the aforementioned cases, the comparative study among the classification techniques is drawn and the best model is identified. The performance of each classifier on each considered domain is evaluated by various performance metrics such as accuracy, F1-score and mean squared error. In the credit card fraud detection model the decision tree classifier performs the best with an accuracy of 99.1% and, in the loan default prediction and bankruptcy detection model, the random forest classifier gives the best accuracy of  97% and 96.84% respectively.

scholarly journals Comparison of Different Ensemble Methods in Credit Card Default Prediction

2021 ◽  
Vol 5 (2) ◽  
pp. 20-25
Author(s):  
Azhi Abdalmohammed Faraj ◽  
Didam Ahmed Mahmud ◽  
Bilal Najmaddin Rashid
Keyword(s):  
Machine Learning ◽  
Neural Networks ◽  
Credit Card ◽  
Characteristic Curve ◽  
Learning Algorithms ◽  
Ensemble Methods ◽  
Research Problem ◽  
Machine Learning Algorithms ◽  
Default Prediction ◽  
Credit Card Default

Credit card defaults pause a business-critical threat in banking systems thus prompt detection of defaulters is a crucial and challenging research problem. Machine learning algorithms must deal with a heavily skewed dataset since the ratio of defaulters to non-defaulters is very small. The purpose of this research is to apply different ensemble methods and compare their performance in detecting the probability of defaults customer’s credit card default payments in Taiwan from the UCI Machine learning repository. This is done on both the original skewed dataset and then on balanced dataset several studies have showed the superiority of neural networks as compared to traditional machine learning algorithms, the results of our study show that ensemble methods consistently outperform Neural Networks and other machine learning algorithms in terms of F1 score and area under receiver operating characteristic curve regardless of balancing the dataset or ignoring the imbalance

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