Compared to consumer lending, Micro, Small and Medium Enterprise (mSME) credit risk modelling is particularly challenging, as, often, the same sources of information are not available. Therefore, it is standard policy for a loan officer to provide a textual loan assessment to mitigate limited data availability. In turn, this statement is analysed by a credit expert alongside any available standard credit data. In our paper, we exploit recent advances from the field of Deep Learning and Natural Language Processing (NLP), including the BERT (Bidirectional Encoder Representations from Transformers) model, to extract information from 60 000 textual assessments provided by a lender. We consider the performance in terms of the AUC (Area Under the receiver operating characteristic Curve) and Brier Score metrics and find that the text alone is surprisingly effective for predicting default. However, when combined with traditional data, it yields no additional predictive capability, with performance dependent on the text's length. Our proposed deep learning model does, however, appear to be robust to the quality of the text and therefore suitable for partly automating the mSME lending process. We also demonstrate how the content of loan assessments influences performance, leading us to a series of recommendations on a new strategy for collecting future mSME loan assessments.
The special and important problems of default prediction for municipal bonds are addressed using a combination of text embeddings from a pre-trained transformer network, a fully connected neural network, and synthetic oversampling. The combination of these techniques provides significant improvement in performance over human estimates, linear models, and boosted ensemble models, on data with extreme imbalance. Less than 0.2% of municipal bonds default, but our technique predicts 9 out of 10 defaults at the time of issue, without using bond ratings, at a cost of false positives on less than 0.1…
ETH Zurich（苏黎世联邦理工学院）；University of Massachusetts Lowell（马萨诸塞大学洛厄尔分校）
Business analytics refers to methods and practices that create value through data for individuals, firms, and organizations. This field is currently experiencing a radical shift due to the advent of deep learning: deep neural networks promise improvements in prediction performance as compared to models from traditional machine learning. However, our research into the existing body of literature reveals a scarcity of research works utilizing deep learning in our discipline. Accordingly, the objectives of this overview article are as follows: (1) we review research on deep learning for business …
Explainable Artificial Intelligence Credit Risk Assessment using Machine Learning
Shreya Department of Computer Science and Engineering Specialisation in Data Science and Artificial Intelligence（Shreya 计算机科学与工程系 数据科学与人工智能专攻）；Mr. Harsh Pathak Assistant Professor Department of Computer Science and Engineering（Harsh Pathak 助理教授 计算机科学与工程系）；SRM University, Sonepat, Haryana, India（SRM 大学, Sonepat, Haryana, India）
The real-time prediction of business processes using historical event data is an important capability of modern business process monitoring systems. Existing process prediction methods are able to also exploit the data perspective of recorded events, in addition to the control-flow perspective. However, while well-structured numerical or categorical attributes are considered in many prediction techniques, almost no technique is able to utilize text documents written in natural language, which can hold information critical to the prediction task. In this paper, we illustrate the design, impleme…
Risk assessment is a substantial problem for financial institutions that has been extensively studied both for its methodological richness and its various practical applications. With the expansion of inclusive finance, recent attentions are paid to micro and small-sized enterprises (MSEs). Compared with large companies, MSEs present a higher exposure rate to default owing to their insecure financial stability. Conventional efforts learn classifiers from historical data with elaborate feature engineering. However, the main obstacle for MSEs involves severe deficiency in credit-related informat…
School of Economics and Finance, Shanghai International Studies University（经济金融学院，上海国际问题研究大学）；School of AI and Advanced Computing, Xi’an Jiaotong-Liverpool University（人工智能与先进计算学院，西安交通大学利物浦大学）；School of Foreign Studies, Shanghai University of Finance and Economics（外国语言学院，上海金融学院）
Application of AI in Credit Risk Scoring for Small Business Loans: A case study on how AI-based random forest model improves a Delphi model outcome in the case of Azerbaijani SMEs
CrunchLLM: Multitask LLMs for Structured Business Reasoning and Outcome Prediction
Department of Computer Science University of Kentucky（计算机科学系 俄亥俄大学）；Department of Computer Science, Institute for Biomedical Informatics University of Kentucky（计算机科学系 生物医学信息学研究所 俄亥俄大学）
Data is fundamental to machine learning-based products and services and is considered strategic due to its externalities for businesses, governments, non-profits, and more generally for society. It is renowned that the value of organizations (businesses, government agencies and programs, and even industries) scales with the volume of available data. What is often less appreciated is that the data value in making useful organizational predictions will range widely and is prominently a function of data characteristics and underlying algorithms. In this research, our goal is to study how the valu…
PDx -- Adaptive Credit Risk Forecasting Model in Digital Lending using Machine Learning Operations
OM & QT Area, Indian Institute of Management Indore（印度管理学院印度尔分校OM与QT部门）；Department of Statistics & Data Science, National University of Singapore（新加坡国立大学统计与数据科学系）
University of Missouri（密苏里大学）；National Institute of Technology Tiruchirappalli（国家理工学院蒂鲁吉拉伯利分校）
To understand the important dimensions of service quality from the passenger's perspective and tailor service offerings for competitive advantage, airlines can capitalize on the abundantly available online customer reviews (OCR). The objective of this paper is to discover company- and competitor-specific intelligence from OCR using an unsupervised text analytics approach. First, the key aspects (or topics) discussed in the OCR are extracted using three topic models - probabilistic latent semantic analysis (pLSA) and two variants of Latent Dirichlet allocation (LDA-VI and LDA-GS). Subsequently,…
Many business documents processed in modern NLP and IR pipelines are visually rich: in addition to text, their semantics can also be captured by visual traits such as layout, format, and fonts. We study the problem of information extraction from visually rich documents (VRDs) and present a model that combines the power of large pre-trained language models and graph neural networks to efficiently encode both textual and visual information in business documents. We further introduce new fine-tuning objectives to improve in-domain unsupervised fine-tuning to better utilize large amount of unlabel…
We study two questions related to competition on the OTC CDS market using data collected as part of the EMIR regulation. First, we study the competition between central counterparties through collateral requirements. We present models that successfully estimate the initial margin requirements. However, our estimations are not precise enough to use them as input to a predictive model for CCP choice by counterparties in the OTC market. Second, we model counterpart choice on the interdealer market using a novel semi-supervised predictive task. We present our methodology as part of the literature …
The rapid growth of data in velocity, volume, value, variety, and veracity has enabled exciting new opportunities and presented big challenges for businesses of all types. Recently, there has been considerable interest in developing systems for processing continuous data streams with the increasing need for real-time analytics for decision support in the business, healthcare, manufacturing, and security. The analytics of streaming data usually relies on the output of offline analytics on static or archived data. However, businesses and organizations like our industry partner Gnowit, strive to …
In the peer to peer (P2P) lending platform, investors hope to maximize their return while minimizing the risk through a comprehensive understanding of the P2P market. A low and stable average default rate across all the borrowers denotes a healthy P2P market and provides investors more confidence in a promising investment. Therefore, having a powerful model to describe the trend of the default rate in the P2P market is crucial. Different from previous studies that focus on modeling the default rate at the individual level, in this paper, we are the first to comprehensively explore the monthly …
