Probabilistic Rule Models as Diagnostic Layers: Interpreting Structural Concept Drift in Post-Crisis Finance
Fuente:
arXiv
Guardado en:
| Autores principales: | , |
|---|---|
| Formato: | Preprint |
| Publicado: |
2025
|
| Materias: | |
| Acceso en línea: | |
| Etiquetas: |
Agregar Etiqueta
Sin Etiquetas, Sea el primero en etiquetar este registro!
|
| _version_ | 1866914124396494848 |
|---|---|
| author | Lesnik, Dmitry Schaefer, Tobias |
| author_facet | Lesnik, Dmitry Schaefer, Tobias |
| contents | Machine learning models used for high-stakes predictions in domains like credit risk face critical degradation due to concept drift, requiring robust and transparent adaptation mechanisms. We propose an architecture, where a dedicated correction layer is employed to efficiently capture systematic shifts in predictive scores when a model becomes outdated. The key element of this architecture is the design of a correction layer using Probabilistic Rule Models (PRMs) based on Markov Logic Networks, which guarantees intrinsic interpretability through symbolic, auditable rules. This structure transforms the correction layer from a simple scoring mechanism into a powerful diagnostic tool capable of isolating and explaining the fundamental changes in borrower riskiness. We illustrate this diagnostic capability using Fannie Mae mortgage data, demonstrating how the interpretable rules extracted by the correction layer successfully explain the structural impact of the 2008 financial crisis on specific population segments, providing essential insights for portfolio risk management and regulatory compliance. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2510_26627 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Probabilistic Rule Models as Diagnostic Layers: Interpreting Structural Concept Drift in Post-Crisis Finance Lesnik, Dmitry Schaefer, Tobias Risk Management 91G40 I.2.0 Machine learning models used for high-stakes predictions in domains like credit risk face critical degradation due to concept drift, requiring robust and transparent adaptation mechanisms. We propose an architecture, where a dedicated correction layer is employed to efficiently capture systematic shifts in predictive scores when a model becomes outdated. The key element of this architecture is the design of a correction layer using Probabilistic Rule Models (PRMs) based on Markov Logic Networks, which guarantees intrinsic interpretability through symbolic, auditable rules. This structure transforms the correction layer from a simple scoring mechanism into a powerful diagnostic tool capable of isolating and explaining the fundamental changes in borrower riskiness. We illustrate this diagnostic capability using Fannie Mae mortgage data, demonstrating how the interpretable rules extracted by the correction layer successfully explain the structural impact of the 2008 financial crisis on specific population segments, providing essential insights for portfolio risk management and regulatory compliance. |
| title | Probabilistic Rule Models as Diagnostic Layers: Interpreting Structural Concept Drift in Post-Crisis Finance |
| topic | Risk Management 91G40 I.2.0 |
| url | https://arxiv.org/abs/2510.26627 |