Extended robust support vector machine based on financial risk minimization

Neural Comput. 2014 Nov;26(11):2541-69. doi: 10.1162/NECO_a_00647. Epub 2014 Jul 24.

Abstract

Financial risk measures have been used recently in machine learning. For example, ν-support vector machine ν-SVM) minimizes the conditional value at risk (CVaR) of margin distribution. The measure is popular in finance because of the subadditivity property, but it is very sensitive to a few outliers in the tail of the distribution. We propose a new classification method, extended robust SVM (ER-SVM), which minimizes an intermediate risk measure between the CVaR and value at risk (VaR) by expecting that the resulting model becomes less sensitive than ν-SVM to outliers. We can regard ER-SVM as an extension of robust SVM, which uses a truncated hinge loss. Numerical experiments imply the ER-SVM's possibility of achieving a better prediction performance with proper parameter setting.

MeSH terms

  • Algorithms
  • Artificial Intelligence*
  • Financial Management
  • Humans
  • Models, Theoretical*
  • Risk Reduction Behavior*
  • Support Vector Machine*