Forecasting Credit Ratings by the Pairwise Classifier

10.29973/JCSA.200706.0003

Ruey-Ching Hwang

Industry effect ； market-driven variable ； ordered probit model ； pairwise classifier ； Standard and Poor's ratings

中國統計學報

45卷2期（2007 / 06 / 01）

144 - 169

英文

Multiclass classification models are important to the prediction of credit ratings. In this paper, we propose a pairwise classifier to predict credit ratings. Our basic approach is to first convert the multiclass classification problem into multiple two-class classification problems, and then the final prediction rule is obtained by aggregating the results from multiple two-class predictions. We present some empirical results to show that such pairwise classifier significantly improves the prediction accuracy rates from 65% to 75%.

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