1. A stacking ensemble model with SMOTE for improved imbalanced classification on credit data.
- Author
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Alamsyah, Nur, Budiman, Yoga, Titan Parama, and Rakhman Alamsyah, R. Yadi
- Subjects
BANKING industry ,CREDIT analysis ,CREDIT risk ,RISK assessment ,RANDOM forest algorithms - Abstract
This research is based on a significant problem in credit risk analysis in the banking sector caused by class imbalance. We face the problem of the model’s inability to accurately identify risks in the ‘‘Charged Off’’ class. As a solution, we propose a stacked ensemble approach that utilizes synthetic minority over-sampling technique (SMOTE) to balance the class distribution. Experiments were conducted by applying SMOTE to the training data before training the credit model using gradient boosting (XGBoost) and random forest (RF) algorithms in a single ensemble. The results show significant improvements in precision, recall, and F1-score after applying SMOTE on the unbalanced classes. The updated model achieved a striking accuracy rate of 0,97 on resampled training data. This re-search clearly identifies the problem of class imbalance as a major challenge in credit risk analysis. The application of SMOTE in a stacked ensemble was found to be effective in improving model performance, making a valuable contribution to the development of more reliable credit models for better risk management and revenue generation in financial institutions. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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