Discrete versus continuous parametrization of bank credit rating systems optimization using differential evolution

K. M. Leung, Xi Zhang

    Research output: Chapter in Book/Report/Conference proceedingConference contribution

    Abstract

    Bank credit rating system is a clustering problem that aims to achieve the optimal classification of the clients' probability of defaults (PDs) into discrete buckets under a number of constraints. This global optimization problem can be parametrized either using continuous or discrete decision variables, and treated using basically the same differential evolution (DE) method that takes into account of real-world constraints imposed by the recent Basel Accord on Banking Supervision. This enables us to make interesting comparisons between continuous versus discrete parametrization of the same problem in terms of the efficiency, robustness and the rate of convergence. It turns out to be beneficial to use discrete parameters for all of these reasons. In addition we have also explored the use of the elitist as well as the classic strategies within the DE approach. The former choice turns out to perform better in terms of efficiency, robustness, and faster convergence, except when the number of required buckets is large.

    Original languageEnglish (US)
    Title of host publicationProceedings of the 12th Annual Genetic and Evolutionary Computation Conference, GECCO '10
    Pages265-272
    Number of pages8
    DOIs
    StatePublished - Aug 27 2010
    Event12th Annual Genetic and Evolutionary Computation Conference, GECCO-2010 - Portland, OR, United States
    Duration: Jul 7 2010Jul 11 2010

    Publication series

    NameProceedings of the 12th Annual Genetic and Evolutionary Computation Conference, GECCO '10

    Other

    Other12th Annual Genetic and Evolutionary Computation Conference, GECCO-2010
    CountryUnited States
    CityPortland, OR
    Period7/7/107/11/10

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    Keywords

    • Bank credit rating
    • Constraints
    • Differential evolution
    • Integer programming
    • Optimization

    ASJC Scopus subject areas

    • Computational Theory and Mathematics
    • Theoretical Computer Science

    Cite this

    Leung, K. M., & Zhang, X. (2010). Discrete versus continuous parametrization of bank credit rating systems optimization using differential evolution. In Proceedings of the 12th Annual Genetic and Evolutionary Computation Conference, GECCO '10 (pp. 265-272). (Proceedings of the 12th Annual Genetic and Evolutionary Computation Conference, GECCO '10). https://doi.org/10.1145/1830483.1830531