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Investigating bankruptcy prediction models in the presence of extreme class imbalance and multiple stages of economy

arXiv.org Machine Learning

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 BPM's 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.


Deep Learning for Financial Applications : A Survey

arXiv.org Machine Learning

Computational intelligence in finance has been a very popular topic for both academia and financial industry in the last few decades. Numerous studies have been published resulting in various models. Meanwhile, within the Machine Learning (ML) field, Deep Learning (DL) started getting a lot of attention recently, mostly due to its outperformance over the classical models. Lots of different implementations of DL exist today, and the broad interest is continuing. Finance is one particular area where DL models started getting traction, however, the playfield is wide open, a lot of research opportunities still exist. In this paper, we tried to provide a state-of-the-art snapshot of the developed DL models for financial applications, as of today. We not only categorized the works according to their intended subfield in finance but also analyzed them based on their DL models. In addition, we also aimed at identifying possible future implementations and highlighted the pathway for the ongoing research within the field.


Designing Quality into Expert Systems: A Case Study in Automated Insurance Underwriting

AAAI Conferences

It can be difficult to design and develop artificial intelligence systems to meet specific quality standards. Often, AI systems are designed to be "as good as possible" rather than meeting particular targets. Using the Design for Six Sigma quality methodology, an automated insurance underwriting expert system was designed, developed, and fielded. Using this methodology resulted in meeting the high quality expectations required for deployment.


Synechron launches AI data science accelerators for FS firms

#artificialintelligence

These four new solution accelerators help financial services and insurance firms solve complex business challenges by discovering meaningful relationships between events that impact one another (correlation) and cause a future event to happen (causation). Following the success of Synechron's AI Automation Program – Neo, Synechron's AI Data Science experts have developed a powerful set of accelerators that allow financial firms to address business challenges related to investment research generation, predicting the next best action to take with a wealth management client, high-priority customer complaints, and better predicting credit risk related to mortgage lending. The Accelerators combine Natural Language Processing (NLP), Deep Learning algorithms and Data Science to solve the complex business challenges and rely on a powerful Spark and Hadoop platform to ingest and run correlations across massive amounts of data to test hypotheses and predict future outcomes. The Data Science Accelerators are the fifth Accelerator program Synechron has launched in the last two years through its Financial Innovation Labs (FinLabs), which are operating in 11 key global financial markets across North America, Europe, Middle East and APAC; including: New York, Charlotte, Fort Lauderdale, London, Paris, Amsterdam, Serbia, Dubai, Pune, Bangalore and Hyderabad. With this, Synechron's Global Accelerator programs now includes over 50 Accelerators for: Blockchain, AI Automation, InsurTech, RegTech, and AI Data Science and a dedicated team of over 300 employees globally.


Finance experts note importance of workforce diversity, global collaboration

The Japan Times

Against a backdrop of startling international developments, such as Brexit and the Hong Kong protests, Japan's financial sector is uniquely positioned to step out of the shadows of its competitors in Singapore and Hong Kong. This is the assessment of The Organization of Global Financial City Tokyo -- also known as FinCity.Tokyo -- which, on March 19, held its FinCity Global Forum at the Grand Hyatt Tokyo in Roppongi to explore the opportunities and challenges that await Japan in its pursuit to become a top global financial hub. Established in April 2019, FinCity.Tokyo is an organization that promotes Tokyo as a global financial hub and supports foreign financial services firms set up in Tokyo. In addition to the keynote and other speeches, the forum consisted of a series of panel discussions that invited industry veterans to discuss a wide array of topics, ranging from regional revitalization and socially oriented asset management to competition and collaboration among international financial cities. The first panel, centered on the theme of "Advancement of the Asset Management Industry and Global Financial City Initiative," invited panelists Yasumasa Tahara, director of the strategy development division at the Financial Services Agency; Kazuhide Toda, managing executive officer and chief investment officer at Nippon Life Insurance Company; and Oki Matsumoto, chairman and CEO at Monex Group Inc., to share their thoughts on how the industry can improve its asset management environment.