arXiv subjects

Wouter Verbeke

Publications and source records attributed to Wouter Verbeke.

At least 37 records · Page 2Linked to original sources

arXiv2023

Uplift vs. predictive modeling: a theoretical analysis

Despite the growing popularity of machine-learning techniques in decision-making, the added value of causal-oriented strategies with respect to pure machine-learning approaches has rarely been quantified in the literature. These strategies are crucial for practitioners in various domains, such as marketing, telecommunications, health care and finance. This paper presents a comprehensive treatment of the subject, starting from firm theoretical foundations and highlighting the parameters that influence the performance of the uplift and predictive approaches. The focus of the paper is on a binary outcome case and a binary action, and the paper presents a theoretical analysis of uplift modeling, comparing it with the classical predictive approach. The main research contributions of the paper include a new formulation of the measure of profit, a formal proof of the convergence of the uplift curve to the measure of profit ,and an illustration, through simulations, of the conditions under which predictive approaches still outperform uplift modeling. We show that the mutual information between the features and the outcome plays a significant role, along with the variance of the estimators, the distribution of the potential outcomes and the underlying costs and benefits of the treatment and the outcome.

cs.LG↗

arXiv2023

A Causal Perspective on Loan Pricing: Investigating the Impacts of Selection Bias on Identifying Bid-Response Functions

In lending, where prices are specific to both customers and products, having a well-functioning personalized pricing policy in place is essential to effective business making. Typically, such a policy must be derived from observational data, which introduces several challenges. While the problem of ``endogeneity'' is prominently studied in the established pricing literature, the problem of selection bias (or, more precisely, bid selection bias) is not. We take a step towards understanding the effects of selection bias by posing pricing as a problem of causal inference. Specifically, we consider the reaction of a customer to price a treatment effect. In our experiments, we simulate varying levels of selection bias on a semi-synthetic dataset on mortgage loan applications in Belgium. We investigate the potential of parametric and nonparametric methods for the identification of individual bid-response functions. Our results illustrate how conventional methods such as logistic regression and neural networks suffer adversely from selection bias. In contrast, we implement state-of-the-art methods from causal machine learning and show their capability to overcome selection bias in pricing data.

cs.LG↗

arXiv2023

Accounting For Informative Sampling When Learning to Forecast Treatment Outcomes Over Time

Machine learning (ML) holds great potential for accurately forecasting treatment outcomes over time, which could ultimately enable the adoption of more individualized treatment strategies in many practical applications. However, a significant challenge that has been largely overlooked by the ML literature on this topic is the presence of informative sampling in observational data. When instances are observed irregularly over time, sampling times are typically not random, but rather informative -- depending on the instance's characteristics, past outcomes, and administered treatments. In this work, we formalize informative sampling as a covariate shift problem and show that it can prohibit accurate estimation of treatment outcomes if not properly accounted for. To overcome this challenge, we present a general framework for learning treatment outcomes in the presence of informative sampling using inverse intensity-weighting, and propose a novel method, TESAR-CDE, that instantiates this framework using Neural CDEs. Using a simulation environment based on a clinical use case, we demonstrate the effectiveness of our approach in learning under informative sampling.

stat.ML↗

arXiv2023

Timing Process Interventions with Causal Inference and Reinforcement Learning

The shift from the understanding and prediction of processes to their optimization offers great benefits to businesses and other organizations. Precisely timed process interventions are the cornerstones of effective optimization. Prescriptive process monitoring (PresPM) is the sub-field of process mining that concentrates on process optimization. The emerging PresPM literature identifies state-of-the-art methods, causal inference (CI) and reinforcement learning (RL), without presenting a quantitative comparison. Most experiments are carried out using historical data, causing problems with the accuracy of the methods' evaluations and preempting online RL. Our contribution consists of experiments on timed process interventions with synthetic data that renders genuine online RL and the comparison to CI possible, and allows for an accurate evaluation of the results. Our experiments reveal that RL's policies outperform those from CI and are more robust at the same time. Indeed, the RL policies approach perfect policies. Unlike CI, the unaltered online RL approach can be applied to other, more generic PresPM problems such as next best activity recommendations. Nonetheless, CI has its merits in settings where online learning is not an option.

cs.LG↗

arXiv2023

Client Recruitment for Federated Learning in ICU Length of Stay Prediction

Machine and deep learning methods for medical and healthcare applications have shown significant progress and performance improvement in recent years. These methods require vast amounts of training data which are available in the medical sector, albeit decentralized. Medical institutions generate vast amounts of data for which sharing and centralizing remains a challenge as the result of data and privacy regulations. The federated learning technique is well-suited to tackle these challenges. However, federated learning comes with a new set of open problems related to communication overhead, efficient parameter aggregation, client selection strategies and more. In this work, we address the step prior to the initiation of a federated network for model training, client recruitment. By intelligently recruiting clients, communication overhead and overall cost of training can be reduced without sacrificing predictive performance. Client recruitment aims at pre-excluding potential clients from partaking in the federation based on a set of criteria indicative of their eventual contributions to the federation. In this work, we propose a client recruitment approach using only the output distribution and sample size at the client site. We show how a subset of clients can be recruited without sacrificing model performance whilst, at the same time, significantly improving computation time. By applying the recruitment approach to the training of federated models for accurate patient Length of Stay prediction using data from 189 Intensive Care Units, we show how the models trained in federations made up from recruited clients significantly outperform federated models trained with the standard procedure in terms of predictive power and training time.

cs.LG↗

arXiv2022

Fraud Analytics: A Decade of Research -- Organizing Challenges and Solutions in the Field

The literature on fraud analytics and fraud detection has seen a substantial increase in output in the past decade. This has led to a wide range of research topics and overall little organization of the many aspects of fraud analytical research. The focus of academics ranges from identifying fraudulent credit card payments to spotting illegitimate insurance claims. In addition, there is a wide range of methods and research objectives. This paper aims to provide an overview of fraud analytics in research and aims to more narrowly organize the discipline and its many subfields. We analyze a sample of almost 300 records on fraud analytics published between 2011 and 2020. In a systematic way, we identify the most prominent domains of application, challenges faced, performance metrics, and methods used. In addition, we build a framework for fraud analytical methods and propose a keywording strategy for future research. One of the key challenges in fraud analytics is access to public datasets. To further aid the community, we provide eight requirements for suitable data sets in research motivated by our research. We structure our sample of the literature in an online database. The database is available online for fellow researchers to investigate and potentially build upon.

cs.CR↗

arXiv2022

Prescriptive maintenance with causal machine learning

Machine maintenance is a challenging operational problem, where the goal is to plan sufficient preventive maintenance to avoid machine failures and overhauls. Maintenance is often imperfect in reality and does not make the asset as good as new. Although a variety of imperfect maintenance policies have been proposed in the literature, these rely on strong assumptions regarding the effect of maintenance on the machine's condition, assuming the effect is (1) deterministic or governed by a known probability distribution, and (2) machine-independent. This work proposes to relax both assumptions by learning the effect of maintenance conditional on a machine's characteristics from observational data on similar machines using existing methodologies for causal inference. By predicting the maintenance effect, we can estimate the number of overhauls and failures for different levels of maintenance and, consequently, optimize the preventive maintenance frequency to minimize the total estimated cost. We validate our proposed approach using real-life data on more than 4,000 maintenance contracts from an industrial partner. Empirical results show that our novel, causal approach accurately predicts the maintenance effect and results in individualized maintenance schedules that are more accurate and cost-effective than supervised or non-individualized approaches.

econ.GN↗

arXiv2022

A new perspective on classification: optimally allocating limited resources to uncertain tasks

A central problem in business concerns the optimal allocation of limited resources to a set of available tasks, where the payoff of these tasks is inherently uncertain. In credit card fraud detection, for instance, a bank can only assign a small subset of transactions to their fraud investigations team. Typically, such problems are solved using a classification framework, where the focus is on predicting task outcomes given a set of characteristics. Resources are then allocated to the tasks that are predicted to be the most likely to succeed. However, we argue that using classification to address task uncertainty is inherently suboptimal as it does not take into account the available capacity. Therefore, we first frame the problem as a type of assignment problem. Then, we present a novel solution using learning to rank by directly optimizing the assignment's expected profit given limited, stochastic capacity. This is achieved by optimizing a specific instance of the net discounted cumulative gain, a commonly used class of metrics in learning to rank. Empirically, we demonstrate that our new method achieves higher expected profit and expected precision compared to a classification approach for a wide variety of application areas and data sets. This illustrates the benefit of an integrated approach and of explicitly considering the available resources when learning a predictive model.

cs.LG↗

arXiv2021

Weight-of-evidence 2.0 with shrinkage and spline-binning

In many practical applications, such as fraud detection, credit risk modeling or medical decision making, classification models for assigning instances to a predefined set of classes are required to be both precise as well as interpretable. Linear modeling methods such as logistic regression are often adopted, since they offer an acceptable balance between precision and interpretability. Linear methods, however, are not well equipped to handle categorical predictors with high-cardinality or to exploit non-linear relations in the data. As a solution, data preprocessing methods such as weight-of-evidence are typically used for transforming the predictors. The binning procedure that underlies the weight-of-evidence approach, however, has been little researched and typically relies on ad-hoc or expert driven procedures. The objective in this paper, therefore, is to propose a formalized, data-driven and powerful method. To this end, we explore the discretization of continuous variables through the binning of spline functions, which allows for capturing non-linear effects in the predictor variables and yields highly interpretable predictors taking only a small number of discrete values. Moreover, we extend upon the weight-of-evidence approach and propose to estimate the proportions using shrinkage estimators. Together, this offers an improved ability to exploit both non-linear and categorical predictors for achieving increased classification precision, while maintaining interpretability of the resulting model and decreasing the risk of overfitting. We present the results of a series of experiments in a fraud detection setting, which illustrate the effectiveness of the presented approach. We facilitate reproduction of the presented results and adoption of the proposed approaches by providing both the dataset and the code for implementing the experiments and the presented approach.

stat.ML↗

arXiv2021

To do or not to do: cost-sensitive causal decision-making

Causal classification models are adopted across a variety of operational business processes to predict the effect of a treatment on a categorical business outcome of interest depending on the process instance characteristics. This allows optimizing operational decision-making and selecting the optimal treatment to apply in each specific instance, with the aim of maximizing the positive outcome rate. While various powerful approaches have been presented in the literature for learning causal classification models, no formal framework has been elaborated for optimal decision-making based on the estimated individual treatment effects, given the cost of the various treatments and the benefit of the potential outcomes. In this article, we therefore extend upon the expected value framework and formally introduce a cost-sensitive decision boundary for double binary causal classification, which is a linear function of the estimated individual treatment effect, the positive outcome probability and the cost and benefit parameters of the problem setting. The boundary allows causally classifying instances in the positive and negative treatment class to maximize the expected causal profit, which is introduced as the objective at hand in cost-sensitive causal classification. We introduce the expected causal profit ranker which ranks instances for maximizing the expected causal profit at each possible threshold for causally classifying instances and differs from the conventional ranking approach based on the individual treatment effect. The proposed ranking approach is experimentally evaluated on synthetic and marketing campaign data sets. The results indicate that the presented ranking method effectively outperforms the cost-insensitive ranking approach and allows boosting profitability.

cs.LG↗

arXiv2020

HydaLearn: Highly Dynamic Task Weighting for Multi-task Learning with Auxiliary Tasks

Multi-task learning (MTL) can improve performance on a task by sharing representations with one or more related auxiliary-tasks. Usually, MTL-networks are trained on a composite loss function formed by a constant weighted combination of the separate task losses. In practice, constant loss weights lead to poor results for two reasons: (i) the relevance of the auxiliary tasks can gradually drift throughout the learning process; (ii) for mini-batch based optimisation, the optimal task weights vary significantly from one update to the next depending on mini-batch sample composition. We introduce HydaLearn, an intelligent weighting algorithm that connects main-task gain to the individual task gradients, in order to inform dynamic loss weighting at the mini-batch level, addressing i and ii. Using HydaLearn, we report performance increases on synthetic data, as well as on two supervised learning domains.

cs.LG↗

arXiv2020

Misclassification cost-sensitive ensemble learning: A unifying framework

Over the years, a plethora of cost-sensitive methods have been proposed for learning on data when different types of misclassification errors incur different costs. Our contribution is a unifying framework that provides a comprehensive and insightful overview on cost-sensitive ensemble methods, pinpointing their differences and similarities via a fine-grained categorization. Our framework contains natural extensions and generalisations of ideas across methods, be it AdaBoost, Bagging or Random Forest, and as a result not only yields all methods known to date but also some not previously considered.

cs.LG↗

arXiv2020

Instance-Dependent Cost-Sensitive Learning for Detecting Transfer Fraud

Card transaction fraud is a growing problem affecting card holders worldwide. Financial institutions increasingly rely upon data-driven methods for developing fraud detection systems, which are able to automatically detect and block fraudulent transactions. From a machine learning perspective, the task of detecting fraudulent transactions is a binary classification problem. Classification models are commonly trained and evaluated in terms of statistical performance measures, such as likelihood and AUC, respectively. These measures, however, do not take into account the actual business objective, which is to minimize the financial losses due to fraud. Fraud detection is to be acknowledged as an instance-dependent cost-sensitive classification problem, where the costs due to misclassification vary between instances, and requiring adapted approaches for learning a classification model. In this article, an instance-dependent threshold is derived, based on the instance-dependent cost matrix for transfer fraud detection, that allows for making the optimal cost-based decision for each transaction. Two novel classifiers are presented, based on lasso-regularized logistic regression and gradient tree boosting, which directly minimize the proposed instance-dependent cost measure when learning a classification model. The proposed methods are implemented in the R packages cslogit and csboost, and compared against state-of-the-art methods on a publicly available data set from the machine learning competition website Kaggle and a proprietary card transaction data set. The results of the experiments highlight the potential of reducing fraud losses by adopting the proposed methods.

stat.AP↗

arXiv2020

Autoencoders for strategic decision support

In the majority of executive domains, a notion of normality is involved in most strategic decisions. However, few data-driven tools that support strategic decision-making are available. We introduce and extend the use of autoencoders to provide strategically relevant granular feedback. A first experiment indicates that experts are inconsistent in their decision making, highlighting the need for strategic decision support. Furthermore, using two large industry-provided human resources datasets, the proposed solution is evaluated in terms of ranking accuracy, synergy with human experts, and dimension-level feedback. This three-point scheme is validated using (a) synthetic data, (b) the perspective of data quality, (c) blind expert validation, and (d) transparent expert evaluation. Our study confirms several principal weaknesses of human decision-making and stresses the importance of synergy between a model and humans. Moreover, unsupervised learning and in particular the autoencoder are shown to be valuable tools for strategic decision-making.

cs.LG↗

arXiv2020

A study of the U.S. domestic air transportation network: Temporal evolution of network topology and robustness from 2001 to 2016

The U.S. air transportation network (ATN) is critical to the mobility and the functioning of the United States. It is thus necessary to ensure that it is well-connected, efficient, and robust. Despite extensive research on its topology, the temporal evolution of the network's robustness and tolerance remains largely unexplored. In the present paper, a temporal study of the domestic U.S. ATN was performed based on annual flight data from 1996 to 2016 and network analytics were used to examine the effects of restructuring that followed the 9/11 events along with the current state of the system. Centrality measures were computed to assess the system's topology and its global robustness. A node deletion method was applied to assess the network's tolerance by simulating a targeted attack scenario. The study showed that the 9/11 terrorist attacks triggered vast restructuring of the network, in terms of efficiency and security. Air traffic expanded, as new airports and air routes were introduced. Airlines reconsidered their strategy and optimized their operations, thus allowing the network to recover rapidly and become even more efficient. Security concerns resulted in significant improvement of the network's robustness. Since 2001, the global traffic and topological properties of the U.S. ATN have displayed continuous growth, due to the network's expansion. On the other hand, the robustness of the system has not shown an improving tendency. Findings suggest that although the system's ability to sustain its operational level under extreme circumstances has lately improved, its tolerance to targeted attacks has deteriorated. The presented methodology may be applied on different network levels or different transportation networks, to provide a general perspective of the system's vulnerabilities.

physics.soc-ph↗

arXiv2020

Learning to rank for uplift modeling

Uplift modeling has effectively been used in fields such as marketing and customer retention, to target those customers that are most likely to respond due to the campaign or treatment. Uplift models produce uplift scores which are then used to essentially create a ranking. We instead investigate to learn to rank directly by looking into the potential of learning-to-rank techniques in the context of uplift modeling. We propose a unified formalisation of different global uplift modeling measures in use today and explore how these can be integrated into the learning-to-rank framework. Additionally, we introduce a new metric for learning-to-rank that focusses on optimizing the area under the uplift curve called the promoted cumulative gain (PCG). We employ the learning-to-rank technique LambdaMART to optimize the ranking according to PCG and show improved results over standard learning-to-rank metrics and equal to improved results when compared with state-of-the-art uplift modeling. Finally, we show how learning-to-rank models can learn to optimize a certain targeting depth, however, these results do not generalize on the test set.

cs.LG↗

arXiv2020

Social Network Analytics for Churn Prediction in Telco: Model Building, Evaluation and Network Architecture

Social network analytics methods are being used in the telecommunication industry to predict customer churn with great success. In particular it has been shown that relational learners adapted to this specific problem enhance the performance of predictive models. In the current study we benchmark different strategies for constructing a relational learner by applying them to a total of eight distinct call-detail record datasets, originating from telecommunication organizations across the world. We statistically evaluate the effect of relational classifiers and collective inference methods on the predictive power of relational learners, as well as the performance of models where relational learners are combined with traditional methods of predicting customer churn in the telecommunication industry. Finally we investigate the effect of network construction on model performance; our findings imply that the definition of edges and weights in the network does have an impact on the results of the predictive models. As a result of the study, the best configuration is a non-relational learner enriched with network variables, without collective inference, using binary weights and undirected networks. In addition, we provide guidelines on how to apply social networks analytics for churn prediction in the telecommunication industry in an optimal way, ranging from network architecture to model building and evaluation.

cs.SI↗

arXiv2020

A Comparative Study of Social Network Classifiers for Predicting Churn in the Telecommunication Industry

Relational learning in networked data has been shown to be effective in a number of studies. Relational learners, composed of relational classifiers and collective inference methods, enable the inference of nodes in a network given the existence and strength of links to other nodes. These methods have been adapted to predict customer churn in telecommunication companies showing that incorporating them may give more accurate predictions. In this research, the performance of a variety of relational learners is compared by applying them to a number of CDR datasets originating from the telecommunication industry, with the goal to rank them as a whole and investigate the effects of relational classifiers and collective inference methods separately. Our results show that collective inference methods do not improve the performance of relational classifiers and the best performing relational classifier is the network-only link-based classifier, which builds a logistic model using link-based measures for the nodes in the network.

cs.SI↗