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It is a quadratic programming problem, which maximum the margin ( 2 / ‖ w ‖ ) when restricting the least classification error rate.
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The problem is to find the pair of hyperplanes that give the maximum margin: The parameters w, b control the function and are called weight vector and bias respectively.
This method is based on simple heuristics that depend on the relationship between the VS and the SVM with the maximum margin, because calculating the VS is complex and impractical where large datasets are concerned.
In our case, there are two parameters: the C from the maximum margin classifier and the γ from the radial basis function kernel.
To avoid a high value of ξ i, some kind of penalty term C was introduced into the original optimization Equation (3), which can be modified as: Minimizefrac{1}{2}{leftVert wrightVert}^2+C{displaystyle sum_{i=1}^n{xi}_i} (8 where C > 0 is the penalty factor to control the trade-off between the maximum margin and the minimum error.
The central bank cut the maximum margin between the base lending rate for commercial banks and the rate charged customers to 2.5 percentage points from 4 points.
C denotes the misclassification penalty parameter which controls the trade-off between the maximum margin and the minimum error and must be set to a given value [ 11].
Its working is based on the principle of finding a hyper plane that gives the maximum margin between the classes of the given data sets.
In classification problems SVMs find the hyper plane that separates positive examples from negative examples with a maximum margin (where the margin is defined as the distance of the closest data point from the separating hyper plane).
In the case of a transaction in which the rate of interest varies solely in accordance with an index, the interest rate determined by adding the index rate in effect on the date of consummation of the transaction to the maximum margin permitted at any time during the loan agreement.
Since there could exist more than one solution to this separation problem, SVM searches the only H with the maximum margin, which means that the distance or separation of the two classes are maximized by the choice of H.
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