AI-Powered Predictive Analytics for Financial Risk Management in U.S. Markets

Md Zikar Hossan; Muslima Begom Riipa; Md Azhad Hossain; Sweety Rani Dhar; Al Modabbir Zaman; Mohammad Hossain; Arif Hossen; Hasan Mahmud Sozib

doi:10.4108/airo.9532

Authors

Md Zikar Hossan International American University
Muslima Begom Riipa International American University
Md Azhad Hossain International American University
Sweety Rani Dhar International American University
Al Modabbir Zaman International American University
Mohammad Hossain International American University
Arif Hossen International American University
Hasan Mahmud Sozib Ahsanullah University of Science and Technology https://orcid.org/0009-0006-5185-2600

DOI:

https://doi.org/10.4108/airo.9532

Keywords:

Financial risk management, AI-powered, predictive analytics, CatBoost, SVM, decision-making, U.S. markets

Abstract

In the fast-changing environment of financial complexity, efficient risk management is vital for economic stability as well as for growth. In this study, we present a robust AI-powered predictive analytics framework to improve financial risk classification in U.S. markets. The framework utilizes advanced machine learning techniques, a hybrid CatBoost and SVM model that allows it to solve challenges like class imbalance in a high-dimensional dataset while maintaining interpretable models. To probe errors, we use techniques such as Principal Component Analysis (PCA) and Synthetic Minority Oversampling Technique (SMOTE) for data quality and fairness in classification. Comprehensive experiments on a financial risk dataset are conducted to evaluate the framework at which it achieves high accuracy (95.93%) and F1-score (0.95) when compared to traditional machine learning models such as Logistic Regression and Random Forest. Furthermore, a feature importance analysis identifies important predictors of financial risk such as Total Debt-to-Income Ratio, Loan Duration, and Interest Rate, providing actionable on decision-making. Additionally, the proposed approach is not only highly scalable but it is also interpretable and adaptable to the dynamic demands of financial institutions. This study serves as a benchmark for predicting analytics for dealing with risk-associated challenges, leading to informed decision-making to ensure economic stability by integrating AI and machine learning in financial systems.

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