FinLangNet: A Novel Deep Learning Framework for Credit Risk Prediction Using Linguistic Analogy in Financial Data

Recent industrial applications in risk prediction still heavily rely on extensively manually-tuned, statistical learning methods. Real-world financial data, characterized by its high-dimensionality, sparsity, high noise levels, and significant imbalance, poses unique challenges for the effective application of deep neural network models. In this work, we introduce a novel deep learning risk prediction framework, FinLangNet, which conceptualizes credit loan trajectories in a structure that mirrors linguistic constructs. This framework is tailored for credit risk prediction using real-world financial data, drawing on structural similarities to language by adapting natural language processing techniques. It focuses on analyzing the evolution and predictability of credit histories through detailed financial event sequences. Our research demonstrates that FinLangNet surpasses traditional statistical methods in predicting credit risk and that its integration with these methods enhances credit card fraud prediction models, achieving a significant improvement of over 1.5 points in the Kolmogorov-Smirnov metric.