The Prediction of Bankruptcy Using Backpropagation Algorithm for “IO” Model Analysis

Abstract

The basic question which every bank it putswhen a client or a future client whishes to take a bank loanis: “The future debtor it’s capable to refund the loan atmaturity? (Installments plus the interest)“. To answer atthis question the bank makes an assessment in which assetsand liabilities are analyze. There is also assessed the creditrating, the cash flow, the securities and, very important,bankrupt risk analysis.For the last one, to calculate bankrupt risk analysis,banks use some models (knows as “Z” score). Few of themare financials methods (like Altman, Canon & Holder,Yves Colonques etc). Nevertheless, these models are beendevelop for a specific situation and for a western economywhich is functional and very articulated. For our economy,we propose a new model that is been build with the specificeconomic dates and inputs, the model we called “IO”model.Without pretending to be able to penetrate over thecomplexity of the phenomenon, this study is trying to do apractical and experimental analysis of bankruptcy usingback propagation algorithm applied to the ”IO” model.

Keywords

• Bank
• Credit
• Model
• Back propagation
• Financial analysis