Variable selection and oversampling in the use of smooth support vector machines for predicting the default risk of companies
In the era of Basel II a powerful tool for bankruptcy prognosis is vital for banks. The tool must be precise but also easily adaptable to the bank's objectives regarding the relation of false acceptances (Type I error) and false rejections (Type II error). We explore the suitability of smooth support vector machines (SSVM), and investigate how important factors such as the selection of appropriate accounting ratios (predictors), length of training period and structure of the training sample influence the precision of prediction. Moreover, we show that oversampling can be employed to control the trade-off between error types, and we compare SSVM with both logistic and discriminant analysis. Finally, we illustrate graphically how different models can be used jointly to support the decision-making process of loan officers. Copyright © 2008 John Wiley & Sons, Ltd.
Volume (Year): 28 (2009)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966|
When requesting a correction, please mention this item's handle: RePEc:jof:jforec:v:28:y:2009:i:6:p:512-534. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.