Feature selection in peer-to-peer lending based on hybrid modified grey wolf optimization with optimized decision tree for credit risk assessment

Abstract

ABSTRACT Lending platforms operating on a peer-to-peer (P2P) basis encounter the intricate challenge of assessing borrower creditworthiness to minimize the risk of defaults. This study addresses this challenge by proposing an advanced approach to feature selection that leverages the Grey Wolf Optimizer (GWO) in conjunction with a finely tuned Decision Tree (DT) model. The main objective is to enhance the precision and efficiency of feature selection processes within P2P lending datasets. The study begins by fine-tuning DT hyperparameters using Genetic Algorithms (GA), yielding an optimal configuration: ‘max_depth’ = 40, ‘min_samples_leaf’ = 20, and ‘criterion’ = ‘entropy’. Subsequent phases involve the application of GWO and modified GWO (nGWO, cGWO, and lGWO) to conduct feature selection under distinct Search Agent (SA) setups (SA = 5, SA = 20, SA = 50). Particularly impressive is the performance of the lGWO model with the SA = 50 setup, achieving a remarkable 91% accuracy while selecting 80.55% of the total 36 features. This study significantly improves how lenders manage risks in P2P lending by identifying high-risk borrowers more effectively, helping lenders reduce financial risks and benefiting all parties involved.