Probabilistic and discriminative group-wise feature selection methods for credit risk analysis

Gülefşan Bozkurt Gönen, Mehmet Gönen, Fikret Gürgen

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

Many financial organizations such as banks and retailers use computational credit risk analysis (CRA) tools heavily due to recent financial crises and more strict regulations. This strategy enables them to manage their financial and operational risks within the pool of financial institutes. Machine learning algorithms especially binary classifiers are very popular for that purpose. In real-life applications such as CRA, feature selection algorithms are used to decrease data acquisition cost and to increase interpretability of the decision process. Using feature selection methods directly on CRA data sets may not help due to categorical variables such as marital status. Such features are usually are converted into binary features using 1-of-k encoding and eliminating a subset of features from a group does not help in terms of data collection cost or interpretability. In this study, we propose to use the probit classifier with a proper prior structure and multiple kernel learning with a proper kernel construction procedure to perform group-wise feature selection (i.e., eliminating a group of features together if they are not helpful). Experiments on two standard CRA data sets show the validity and effectiveness of the proposed binary classification algorithm variants.

Original languageEnglish (US)
Pages (from-to)11709-11717
Number of pages9
JournalExpert Systems with Applications
Volume39
Issue number14
DOIs
StatePublished - Oct 15 2012

Keywords

  • Credit risk analysis
  • Feature selection
  • Multiple kernel learning
  • Probit classifier
  • Sparsity

ASJC Scopus subject areas

  • Engineering(all)
  • Computer Science Applications
  • Artificial Intelligence

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