Credit Rating Forecasting Using Machine Learning Techniques

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Credit ratings are an important metric for business managers and a contributor to economic growth. Forecasting such ratings might be a suitable application of big data analytics. As machine learning is one of the foundations of intelligent big data analytics, this chapter presents a comparative analysis of traditional statistical models and popular machine learning models for the prediction of Moody's long-term corporate debt ratings. Machine learning techniques such as artificial neural networks, support vector machines, and random forests generally outperformed their traditional counterparts in terms of both overall accuracy and the Kappa statistic. The parametric models may be hindered by missing variables and restrictive assumptions about the underlying distributions in the data. This chapter reveals the relative effectiveness of non-parametric big data analytics to model a complex process that frequently arises in business, specifically determining credit ratings.

Copyright © 2019 by IGI Global
Reproduced with permission.
Original languageEnglish
Title of host publicationManagerial Perspectives on Intelligent Big Data Analytics
EditorsZhaohao Sun
PublisherIGI Global
Number of pages19
ISBN (Electronic)9781522572787
ISBN (Print)9781522572770, 1522572775
Publication statusPublished - Feb 2019


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