Credit Rating Forecasting Using Machine Learning Techniques

Research output: Chapter in Book/Report/Conference proceedingChapterResearchpeer-review

Abstract

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.
Original languageEnglish
Title of host publicationManagerial Perspectives on Intelligent Big Data Analytics
EditorsZhaohao Sun
PublisherIGI Global
Chapter10
Pages180-198
Number of pages19
ISBN (Electronic)9781522572787
ISBN (Print)9781522572770, 1522572775
DOIs
Publication statusPublished - Feb 2019

Fingerprint

Credit rating
Machine learning
Rating
Comparative analysis
Managers
Artificial neural network
Learning model
Parametric model
Prediction
Statistics
Economic growth
Support vector machine
Statistical model
Corporate debt

Cite this

Wallis, M., Kumar, K., & Gepp, A. (2019). Credit Rating Forecasting Using Machine Learning Techniques. In Z. Sun (Ed.), Managerial Perspectives on Intelligent Big Data Analytics (pp. 180-198). IGI Global. https://doi.org/10.4018/978-1-5225-7277-0.ch010
Wallis, Mark ; Kumar, Kuldeep ; Gepp, Adrian. / Credit Rating Forecasting Using Machine Learning Techniques. Managerial Perspectives on Intelligent Big Data Analytics. editor / Zhaohao Sun. IGI Global, 2019. pp. 180-198
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Wallis, M, Kumar, K & Gepp, A 2019, Credit Rating Forecasting Using Machine Learning Techniques. in Z Sun (ed.), Managerial Perspectives on Intelligent Big Data Analytics. IGI Global, pp. 180-198. https://doi.org/10.4018/978-1-5225-7277-0.ch010

Credit Rating Forecasting Using Machine Learning Techniques. / Wallis, Mark; Kumar, Kuldeep; Gepp, Adrian.

Managerial Perspectives on Intelligent Big Data Analytics. ed. / Zhaohao Sun. IGI Global, 2019. p. 180-198.

Research output: Chapter in Book/Report/Conference proceedingChapterResearchpeer-review

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Wallis M, Kumar K, Gepp A. Credit Rating Forecasting Using Machine Learning Techniques. In Sun Z, editor, Managerial Perspectives on Intelligent Big Data Analytics. IGI Global. 2019. p. 180-198 https://doi.org/10.4018/978-1-5225-7277-0.ch010