Financial Classification Using an Artificial Immune System

Recent years have seen a dramatic increase in the application of biologically-inspired algorithms to business problems. Applications of neural networks and evolutionary algorithms have become common. However, as yet there have been few applications of artificial immune systems (AIS), algorithms that are inspired by the workings of the natural immune system. The natural immune system can be considered as a distributed, self-organizing, classification system that operates in a dynamic environment. The mechanisms of natural immune systems, including their ability to distinguish between self and non-self, provides a rich metaphorical inspiration for the design of patternrecognition algorithms. This chapter introduces AIS and provides an example of how an immune algorithm can be used to develop a classification system for predicting IDEA GROUP PUBLISHING This paper appears in the book, Business Applications and Computational Intelligence edited by Kevin E. Voges and Nigel K. L. Pope © 2006, Idea Group Inc. 701 E. Chocolate Avenue, Suite 200, Hershey PA 17033-1240, USA Tel: 717/533-8845; Fax 717/533-8661; URL-http://www.idea-group.com ITB12012 Artificial Immune System 389 Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. corporate failure. The developed system displays good classification accuracy out-ofsample, up to two years prior to failure.