Differential evolution trained wavelet neural networks: Application to bankruptcy prediction in banks

Authors:
Nikunj Chauhan;V. Ravi;D. Karthik Chandra
Affiliations:
Institute for Development and Research in Banking Technology, Castle Hills Road #1, Masab Tank, Hyderabad 500057, AP, India;Institute for Development and Research in Banking Technology, Castle Hills Road #1, Masab Tank, Hyderabad 500057, AP, India;Institute for Development and Research in Banking Technology, Castle Hills Road #1, Masab Tank, Hyderabad 500057, AP, India
Venue:
Expert Systems with Applications: An International Journal
Year:
2009

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Abstract

In this study, differential evolution algorithm (DE) is proposed to train a wavelet neural network (WNN). The resulting network is named as differential evolution trained wavelet neural network (DEWNN). The efficacy of DEWNN is tested on bankruptcy prediction datasets viz. US banks, Turkish banks and Spanish banks. Further, its efficacy is also tested on benchmark datasets such as Iris, Wine and Wisconsin Breast Cancer. Moreover, Garson's algorithm for feature selection in multi layer perceptron is adapted in the case of DEWNN. The performance of DEWNN is compared with that of threshold accepting trained wavelet neural network (TAWNN) [Vinay Kumar, K., Ravi, V., Mahil Carr, & Raj Kiran, N. (2008). Software cost estimation using wavelet neural networks. Journal of Systems and Software] and the original wavelet neural network (WNN) in the case of all data sets without feature selection and also in the case of four data sets where feature selection was performed. The whole experimentation is conducted using 10-fold cross validation method. Results show that soft computing hybrids viz., DEWNN and TAWNN outperformed the original WNN in terms of accuracy and sensitivity across all problems. Furthermore, DEWNN outscored TAWNN in terms of accuracy and sensitivity across all problems except Turkish banks dataset.