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Model averaging and ensemble
methods for risk corporate
estimation
SYstemic Risk TOmography:
Signals, Measurements, Transmission Channels, and Policy Interventions
Marika Vezzoli
University of Brescia
Silvia Figini
University of Pavia
Sovereigns Banks and other
Financial
Intermediaries (BFIs)
Corporations
Sovereigns Banks and other
Financial
Intermediaries (BFIs)
Corporations
!   In this study we investigate ensemble learning and classical model
averaging in order to identify which procedure performed better in terms
of predictive accuracy
!   We compare ensemble learning approaches, like Random Forest
(Breiman, 2001) with Bayesian Model Averaging (BMA) (e.g. Steel, 2011)
!   Moreover, we compare single models with respect to their aggregated
version. More precisely:
!  Classification Trees vs Random Forest
!  Logistic Regression vs Bayesian Model Averaging
!  In order to make a coherent comparison among the models we have
fixed a set of performance indicators able to assess the models at hand
!   Empirical evidences are given on a real credit risk data sample
 	
  
Figini and Giudici (2013)
 	
  
We have compared
!   BMA with Random Forests
and also
!   Logistic Regression vs Bayesian Model Averaging
!   Classification Trees vs Random Forests
Both in the parametric and non parametric frameworks we
underline that ensemble models perform better in terms of the
key performance indicators employed
Breiman, L.: Random forests. Mach. Learn. 45(1)
Capistran, C., Timmermann, A., Aiolfi, M.: Forecast Combinations. Technical Report
(2010)
Figini, S., Fantazzini, D.: Random Survival Forests Models for SME Credit Risk
Measurement. Methodol. Comput. Appl. 11, 29–45 (2009)
Figini, S., Giudici, P.: Credit risk predictions with Bayesian model averaging. DEM
Working Paper Series, 34 (2013)
Freund, Y., Schapire, R.E.: Experiments with a new boosting algorithm. Machine
Learning: Proceedings of the Thirteenth International Conference, Morgan
Kaufman, San Francisco, 148–156 (1996)
Krzanowski, W.J., Hand, D.J.: ROC curves for continuous data. CRC/Chapman and Hall
(2009)
Schapire, R.E.: The strength of the weak learnability. Mach. Learn. 5(2), 197–227
(1990)
Steel, M.F.J.: Bayesian Model Averaging and Forecasting. Bulletin of E.U. and U.S.
Inflation and Macroeconomic Analysis, 30–41 (2011)
Model averaging and ensemble methods for risk corporate estimation - Silvia Figini, Marika Vezzoli. September, 18 2013

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Model averaging and ensemble methods for risk corporate estimation - Silvia Figini, Marika Vezzoli. September, 18 2013

  • 1. Model averaging and ensemble methods for risk corporate estimation SYstemic Risk TOmography: Signals, Measurements, Transmission Channels, and Policy Interventions Marika Vezzoli University of Brescia Silvia Figini University of Pavia
  • 2. Sovereigns Banks and other Financial Intermediaries (BFIs) Corporations
  • 3. Sovereigns Banks and other Financial Intermediaries (BFIs) Corporations
  • 4. !   In this study we investigate ensemble learning and classical model averaging in order to identify which procedure performed better in terms of predictive accuracy !   We compare ensemble learning approaches, like Random Forest (Breiman, 2001) with Bayesian Model Averaging (BMA) (e.g. Steel, 2011) !   Moreover, we compare single models with respect to their aggregated version. More precisely: !  Classification Trees vs Random Forest !  Logistic Regression vs Bayesian Model Averaging !  In order to make a coherent comparison among the models we have fixed a set of performance indicators able to assess the models at hand !   Empirical evidences are given on a real credit risk data sample
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  • 16. We have compared !   BMA with Random Forests and also !   Logistic Regression vs Bayesian Model Averaging !   Classification Trees vs Random Forests Both in the parametric and non parametric frameworks we underline that ensemble models perform better in terms of the key performance indicators employed
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  • 18. Breiman, L.: Random forests. Mach. Learn. 45(1) Capistran, C., Timmermann, A., Aiolfi, M.: Forecast Combinations. Technical Report (2010) Figini, S., Fantazzini, D.: Random Survival Forests Models for SME Credit Risk Measurement. Methodol. Comput. Appl. 11, 29–45 (2009) Figini, S., Giudici, P.: Credit risk predictions with Bayesian model averaging. DEM Working Paper Series, 34 (2013) Freund, Y., Schapire, R.E.: Experiments with a new boosting algorithm. Machine Learning: Proceedings of the Thirteenth International Conference, Morgan Kaufman, San Francisco, 148–156 (1996) Krzanowski, W.J., Hand, D.J.: ROC curves for continuous data. CRC/Chapman and Hall (2009) Schapire, R.E.: The strength of the weak learnability. Mach. Learn. 5(2), 197–227 (1990) Steel, M.F.J.: Bayesian Model Averaging and Forecasting. Bulletin of E.U. and U.S. Inflation and Macroeconomic Analysis, 30–41 (2011)