Credit Risk Evaluation Using Support Vector Machine with Mixture of Kernel

Authors:
Liwei Wei;Jianping Li;Zhenyu Chen
Affiliations:
Institute of Policy & Management, Chinese Academy of Sciences, Beijing 100080, China and Graduate University of Chinese Academy of Sciences, Beijing 100039, China;Institute of Policy & Management, Chinese Academy of Sciences, Beijing 100080, China;Institute of Policy & Management, Chinese Academy of Sciences, Beijing 100080, China and Graduate University of Chinese Academy of Sciences, Beijing 100039, China
Venue:
ICCS '07 Proceedings of the 7th international conference on Computational Science, Part II
Year:
2007

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Abstract

Recent studies have revealed that emerging modern machine learning techniques are advantageous to statistical models for credit risk evaluation, such as SVM. In this study, we discuss the applications of the support vector machine with mixture of kernel to design a credit evaluation system, which can discriminate good creditors from bad ones. Differing from the standard SVM, the SVM-MK uses the 1-norm based object function and adopts the convex combinations of single feature basic kernels. Only a linear programming problem needs to be resolved and it greatly reduces the computational costs. More important, it is a transparent model and the optimal feature subset can be obtained automatically. A real life credit dataset from a US commercial bank is used to demonstrate the good performance of the SVM-MK.