The problem of determining the probability of default or credit risk for companies is crucial when providing financial services. This problem is often modeled based on snapshot data that does not take the time dimension into account. Instead, we approach the problem with enterprise resource planning data in time series. With the added complexity the time series introduce, we pose that deep learning models could be suitable for the task. A comparison of a fully convolutional network and a transformer encoder was made to the current state-of-the-art model for the probability of default problem, XGBoost. The comparison showed that XGBoost generalized very well to the time series domain, even well enough to beat the deep learning models across all evaluation metrics. Furthermore, time series data with monthly, quarterly and yearly timestamps over three years was tested. Also, public features that could be extracted from quarterly and annual financial reports were compared with internal enterprise resource planning data. We found that the introduction of time series to the problem improves the performance and that models based on internal data outperform the ones based on public data. To be more precise, we argue that the dataset being based on small to medium-sized companies lessens the impact of highly granular data, and makes the selection of what features to include more prominent. This is something XGBoost takes advantage of in a very efficient way, especially when extracting features that capture the behavior of the time series, causing it to beat the deep learning competitors even though it does not pick up on the sequential aspect of the data.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:liu-205758 |
| Date | January 2024 |
| Creators | Vävinggren, David, Säll, Emil |
| Publisher | Linköpings universitet, Institutionen för datavetenskap |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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