16
W. K. Hardle, R. A. Moro, and D. Schafer
PD and Cumulative PD
50 100 150
Company rank
200
Fig. 12. PD (blue line) and cumulative PD (green line) estimated with the SVM
for a subsample of 200 observation from the Bundesbank data. The variables were
included into the model that achieved the highest AR: K5, K29, K7, K33, K18, K21,
K24 and K9. The higher is the score, the higher is the rank of a company.
into an RGB colour and plotted by the XploRe as a small filled quadrangle.
The quadranges evenly cover the whole area giving a continuous PD repre-
sentation. The contour lines can be also added to the graph as illustrated by
Figure 18.
7 Conclusion
In this chapter we demonstrated the application of graphical tools for variable
selection, data visualisation and financial information representation and dis-
cussed such essential aspects of graphical analysis as colour coding. We believe
that graphical analysis will have an increased importance as non-parametric
models, such as SVM, are becoming more and more popular. On the other
hand graphical representation can facilitate the acceptance of non-parametric
models in various areas, e.g. finance, medicine, sound and image processing,
etc. This will contribute to the development of those areas since non-linear
non-parametric models better represent reality and provide higher forecasting
accuracy.