Neural and wavelet network models for financial distress classification

This work analyzes the use of linear discriminant models, multi-layer perceptron neural networks and wavelet networks for corporate financial distress prediction. Although simple and easy to interpret, linear models require statistical assumptions that may be unrealistic. Neural networks are able to discriminate patterns that are not linearly separable, but the large number of parameters involved in a neural model often causes generalization problems. Wavelet networks are classification models that implement nonlinear discriminant surfaces as the superposition of dilated and translated versions of a single "mother wavelet" function. In this paper, an algorithm is proposed to select dilation and translation parameters that yield a wavelet network classifier with good parsimony characteristics. The models are compared in a case study involving failed and continuing British firms in the period 1997-2000. Problems associated with over-parameterized neural networks are illustrated and the Optimal Brain Damage pruning technique is employed to obtain a parsimonious neural model. The results, supported by a re-sampling study, show that both neural and wavelet networks may be a valid alternative to classical linear discriminant models.

Comparison of extrasystolic ECG signal classifiers using discrete wavelet transforms

This work compares and contrasts results of classifying time-domain ECG signals with pathological conditions taken from the MITBIH arrhythmia database. Linear discriminant analysis and a multi-layer perceptron were used as classifiers. The neural network was trained by two different methods, namely back-propagation and a genetic algorithm. Converting the time-domain signal into the wavelet domain reduced the dimensionality of the problem at least 10-fold. This was achieved using wavelets from the db6 family as well as using adaptive wavelets generated using two different strategies. The wavelet transforms used in this study were limited to two decomposition levels. A neural network with evolved weights proved to be the best classifier with a maximum of 99.6% accuracy when optimised wavelet-transform ECG data wits presented to its input and 95.9% accuracy when the signals presented to its input were decomposed using db6 wavelets. The linear discriminant analysis achieved a maximum classification accuracy of 95.7% when presented with optimised and 95.5% with db6 wavelet coefficients. It is shown that the much simpler signal representation of a few wavelet coefficients obtained through an optimised discrete wavelet transform facilitates the classification of non-stationary time-variant signals task considerably. In addition, the results indicate that wavelet optimisation may improve the classification ability of a neural network. (c) 2005 Elsevier B.V. All rights reserved.

Optimal discrimination and classification of THz spectra in the wavelet domain

In rapid scan Fourier transform spectrometry, we show that the noise in the wavelet coefficients resulting from the filter bank decomposition of the complex insertion loss function is linearly related to the noise power in the sample interferogram by a noise amplification factor. By maximizing an objective function composed of the power of the wavelet coefficients divided by the noise amplification factor, optimal feature extraction in the wavelet domain is performed. The performance of a classifier based on the output of a filter bank is shown to be considerably better than that of an Euclidean distance classifier in the original spectral domain. An optimization procedure results in a further improvement of the wavelet classifier. The procedure is suitable for enhancing the contrast or classifying spectra acquired by either continuous wave or THz transient spectrometers as well as for increasing the dynamic range of THz imaging systems. (C) 2003 Optical Society of America.

A continuous wavelet transform and classification method for delirium motoric subtyping

The usefulness of motor subtypes of delirium is unclear due to inconsistency in subtyping methods and a lack of validation with objective measures of activity. The activity of 40 patients was measured over 24 h with a discrete accelerometer-based activity monitor. The continuous wavelet transform (CWT) with various mother wavelets were applied to accelerometry data from three randomly selected patients with DSM-IV delirium that were readily divided into hyperactive, hypoactive, and mixed motor subtypes. A classification tree used the periods of overall movement as measured by the discrete accelerometer-based monitor as determining factors for which to classify these delirious patients. This data used to create the classification tree were based upon the minimum, maximum, standard deviation, and number of coefficient values, generated over a range of scales by the CWT. The classification tree was subsequently used to define the remaining motoric subtypes. The use of a classification system shows how delirium subtypes can be categorized in relation to overall motoric behavior. The classification system was also implemented to successfully define other patient motoric subtypes. Motor subtypes of delirium defined by observed ward behavior differ in electronically measured activity levels.

Comparison of subspace and ARX models of a waveguide's terahertz transient response after optimal wavelet filtering

A quasi-optical deembedding technique for characterizing waveguides is demonstrated using wide-band time-resolved terahertz spectroscopy. A transfer function representation is adopted for the description of the signal in the input and output port of the waveguides. The time-domain responses were discretized and the waveguide transfer function was obtained through a parametric approach in the z-domain after describing the system with an AutoRegressive with eXogenous input (ARX), as well as with a state-space model. Prior to the identification procedure, filtering was performed in the wavelet domain to minimize both signal distortion, as well as the noise propagating in the ARX and subspace models. The optimal filtering procedure used in the wavelet domain for the recorded time-domain signatures is described in detail. The effect of filtering prior to the identification procedures is elucidated with the aid of pole-zero diagrams. Models derived from measurements of terahertz transients in a precision WR-8 waveguide adjustable short are presented.

A fast identification algorithm for Box-Cox transformation based radial basis function neural network

In this letter, a Box-Cox transformation-based radial basis function (RBF) neural network is introduced using the RBF neural network to represent the transformed system output. Initially a fixed and moderate sized RBF model base is derived based on a rank revealing orthogonal matrix triangularization (QR decomposition). Then a new fast identification algorithm is introduced using Gauss-Newton algorithm to derive the required Box-Cox transformation, based on a maximum likelihood estimator. The main contribution of this letter is to explore the special structure of the proposed RBF neural network for computational efficiency by utilizing the inverse of matrix block decomposition lemma. Finally, the Box-Cox transformation-based RBF neural network, with good generalization and sparsity, is identified based on the derived optimal Box-Cox transformation and a D-optimality-based orthogonal forward regression algorithm. The proposed algorithm and its efficacy are demonstrated with an illustrative example in comparison with support vector machine regression.

Modified radial basis function neural network using output transformation

A modified radial basis function (RBF) neural network and its identification algorithm based on observational data with heterogeneous noise are introduced. The transformed system output of Box-Cox is represented by the RBF neural network. To identify the model from observational data, the singular value decomposition of the full regression matrix consisting of basis functions formed by system input data is initially carried out and a new fast identification method is then developed using Gauss-Newton algorithm to derive the required Box-Cox transformation, based on a maximum likelihood estimator (MLE) for a model base spanned by the largest eigenvectors. Finally, the Box-Cox transformation-based RBF neural network, with good generalisation and sparsity, is identified based on the derived optimal Box-Cox transformation and an orthogonal forward regression algorithm using a pseudo-PRESS statistic to select a sparse RBF model with good generalisation. The proposed algorithm and its efficacy are demonstrated with numerical examples.

A review and implementation of swarm pattern formation and transformation models

Purpose: The purpose of this paper is to address a classic problem – pattern formation identified by researchers in the area of swarm robotic systems – and is also motivated by the need for mathematical foundations in swarm systems. Design/methodology/approach: The work is separated out as inspirations, applications, definitions, challenges and classifications of pattern formation in swarm systems based on recent literature. Further, the work proposes a mathematical model for swarm pattern formation and transformation. Findings: A swarm pattern formation model based on mathematical foundations and macroscopic primitives is proposed. A formal definition for swarm pattern transformation and four special cases of transformation are introduced. Two general methods for transforming patterns are investigated and a comparison of the two methods is presented. The validity of the proposed models, and the feasibility of the methods investigated are confirmed on the Traer Physics and Processing environment. Originality/value: This paper helps in understanding the limitations of existing research in pattern formation and the lack of mathematical foundations for swarm systems. The mathematical model and transformation methods introduce two key concepts, namely macroscopic primitives and a mathematical model. The exercise of implementing the proposed models on physics simulator is novel.

Application of auto regressive models of wavelet sub-bands for classifying Terahertz pulse measurements

This paper presents an approach for automatic classification of pulsed Terahertz (THz), or T-ray, signals highlighting their potential in biomedical, pharmaceutical and security applications. T-ray classification systems supply a wealth of information about test samples and make possible the discrimination of heterogeneous layers within an object. In this paper, a novel technique involving the use of Auto Regressive (AR) and Auto Regressive Moving Average (ARMA) models on the wavelet transforms of measured T-ray pulse data is presented. Two example applications are examined - the classi. cation of normal human bone (NHB) osteoblasts against human osteosarcoma (HOS) cells and the identification of six different powder samples. A variety of model types and orders are used to generate descriptive features for subsequent classification. Wavelet-based de-noising with soft threshold shrinkage is applied to the measured T-ray signals prior to modeling. For classi. cation, a simple Mahalanobis distance classi. er is used. After feature extraction, classi. cation accuracy for cancerous and normal cell types is 93%, whereas for powders, it is 98%.

Transformation of plant cells

Plant cells are transformed by bringing them into contact with a a multiplicity of needle-like bodies on which the cells may be impaled. This causes a rupture in the cell wall allowing entry of transforming DNA either from a surrounding liquid medium or of DNA previously bound to or otherwise entrapped in the needle-like projections.

Transformation of plant cells

Plant cells are transformed by bringing them into contact with a a multiplicity of needle-like bodies on which the cells may be impaled. This causes a rupture in the cell wall allowing entry of transforming DNA either from a surrounding liquid medium or of DNA previously bound to or otherwise entrapped in the needle-like projections.