In this paper, we apply machine learning to forecast the conditional variance of long-term stock returns measured in excess of different benchmarks, considering the short- and long-term interest rate, the earnings-by-price ratio, and the inflation rate. In particular, we apply in a two-step...

This paper proposes a rating methodology that is based on a non-linear classification method, the support vector machine, and a non-parametric technique for mapping rating scores into probabilities of default. We give an introduction to underlying statistical models and represent the results of...

We propose a new nonlinear classification method based on a Bayesian "sum-of-trees" model, the Bayesian Additive Classification Tree (BACT), which extends the Bayesian Additive Regression Tree (BART) method into the classification context. Like BART, the BACT is a Bayesian nonparametric additive...

In the era of Basel II a powerful tool for bankruptcy prognosis is vital for banks. The tool must be precise but also easily adaptable to the bank's objections regarding the relation of false acceptances (Type I error) and false rejections (Type II error). We explore the suitability of Smooth...

In recent years support vector regression (SVR), a novel neural network (NN) technique, has been successfully used for financial forecasting. This paper deals with the application of SVR in volatility forecasting. Based on a recurrent SVR, a GARCH method is proposed and is compared with a moving...

Recurrent Support Vector Regression for a Nonlinear ARMA Model with Applications to Forecasting Financial Returns Abstract: Motivated by the recurrent Neural Networks, this paper proposes a recurrent Support Vector Regression (SVR) procedure to forecast nonlinear ARMA model based simulated data...

We model the dynamics of ask and bid curves in a limit order book market using a dynamic semiparametric factor model. The shape of the curves is captured by a factor structure which is estimated nonparametrically. Corresponding factor loadings are assumed to follow multivariate dynamics and are...