Enhancing credit risk prediction based on ensemble tree‐based feature transformation and logistic regression
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Published:2023-11-02
Issue:2
Volume:43
Page:429-455
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ISSN:0277-6693
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Container-title:Journal of Forecasting
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language:en
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Short-container-title:Journal of Forecasting
Author:
Liu Jiaming1ORCID,
Liu Jiajia2,
Wu Chong3,
Wang Shouyang4
Affiliation:
1. School of International Economics and Management Beijing Technology and Business University Beijing China
2. School of Economics and Management Beijing University of Chemical Technology Beijing China
3. School of Economics and Management Harbin Institute of Technology Harbin China
4. Academy of Mathematics and Systems Science Chinese Academy of Sciences Beijing China
Abstract
AbstractThe assessment of credit risk for P2P lending platform applicants is critical to investors. Feature engineering is an essential technique in distilling classification knowledge during the credit risk prediction data preprocessing stage. Although previous literature used feature selection methods to identify key features, feature transformation is more useful in discovering intrinsic nonlinear characteristics in credit data. In this study, we propose a synthetic multiple tree‐based feature transformation method to generate features. Multiple tree‐based feature transformation methods are employed and fused to acquire a new feature set. The bagging‐based tree ensemble feature transformation method (Bagging‐TreeEnsembleFT) and boosting‐based tree ensemble feature transformation method (Boosting‐TreeEnsembleFT) are two types of feature transformation methods that we specifically propose to validate their effect. We verify the credit risk prediction performance using the proposed synthetic feature transformation methods on real P2P Lending credit datasets. Empirical analysis demonstrates that tree‐based ensemble feature transformation methods with boosting ensemble strategy achieve better prediction performance on various datasets corresponding to different partitions and class distributions compared to tree‐based ensemble feature transformation methods with bagging ensemble strategy and individuals. Moreover, the proposed synthetic feature transformation method improves the credit risk prediction performance in terms of accuracy, AUC, and F1‐score.
Funder
National Natural Science Foundation of China
Beijing Municipal Office of Philosophy and Social Science Planning
Natural Science Foundation of Beijing Municipality
Subject
Management Science and Operations Research,Statistics, Probability and Uncertainty,Strategy and Management,Computer Science Applications,Modeling and Simulation,Economics and Econometrics