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Artificial Neural Networks (ANN) 
• Human information processing takes place through the interaction of many 
billions of neurons connected to each other, each sending excitatory or inhibitory 
signals to other neurons (excite in positive/suppress in negative) 
• Human Brain: Parallel Processing 
+ excites 
- supresses 
+ - 
- 
+ + 
- +
ANN 
• The neuron receives signals from other 
neurons, collects the input signals, and 
transforms the collected input signal 
• The single neuron then transmits the 
transformed signal to other neurons
ANN 
• The signals that pass through the junction, known as synapses, are 
either weakened or strengthened depending upon the strength of the 
synaptic connection 
• By modifying synaptic strengths, the human brain is able to store 
knowledge and thus allow certain inputs to result in specific output or 
behavior 
• Translates into a mathematical model 
• Artificial Neural Networks compare weights 
– Synopsis is small = - 
– Synopsis is large = + 
• ON = + 
• OFF = - 
• Neurons are trained 
– Neurons are on (+) or off (-) 
• Example: Could be Facial Recognition
ANN 
• A basic ANN model consists of 
– Computational units 
– Links 
• A unit emulate the functions of a neuron 
• Computational units are connected by links with 
variable weights which represent synapses in the 
biological model (Human Brain) 
• Learning Curve: Change synopsis in face recognition 
– Changes & learns new info
ANN 
• The unit receives a weighted sum of all 
its input via connections and computes 
its own output value using its own 
output function 
• The output value is then propagated to 
many other units via connection 
between units
Basic Representation 
• Parallel Transfer 
– Some connections bi-directional, some one-way 
• Variation of algorithms 
– 2 levels 
– Multi-levels 
• y=f (x1, x2, x3) 
– where is is a transform function (linear or non-linear)
Basic Representation 
Sum: Netj = Sum of Wji Xi 
Transfer: Yj = F (Netj ) 
S u m Transfer 
X1 
X2 
X3 jth Computational 
Unit 
Weights 
Wj1 
Wj2 
Wj3 
Yj 
Output Path
ANN 
• Computational units in ANN are 
arranged in layers - input, output, and 
hidden layers 
• Units in a hidden layer are called 
hidden units
Hidden Units 
• Hidden unit is a unit which represents 
neither input nor output variables 
• It is used to support the required 
function from input to output
Artificial Intelligence: Artificial Neural Networks
Artificial Intelligence: Artificial Neural Networks
Artificial Intelligence: Artificial Neural Networks
ANN Learning Algorithm 
Supervised Learning Unsupervised Learning 
Binary Input Continued Binary Continued 
Hopfield Net Perceptron ART I ART II 
Boltzman- Backpropagation Self-organizing 
Machine (popular algorithm widely used) Map
Backpropagation 
• The algorithm is a learning rule which 
suggests a way of modifying weights to 
represent a function from input to output 
• The network architecture is a 
feedforward network where 
computational units are structured in a 
multi-layered network: an input layer, 
one or more hidden layer(s), and an 
output layer
Backpropagation 
• The units on a layer have full 
connections to units on the adjacent 
layers, but no connection to units on the 
same layer
Backpropagation 
• Calculate the difference (error) between 
the expected and actual output value 
• Adjust the weights in order to minimize 
the error 
• Minimize the error by performing a 
gradient decent on the error surface
Backpropagation 
• The amount of the weight change for 
each input pattern in an epoch is 
proportional to the error 
• An epoch is completed after the 
network sees all of the input and output 
pairs
Five Input Var. 
Net Working Capital/Total Assets 
Retained Earning/Total Assets 
EBIT/Total Assets 
Market Value of Common 
and Preferred Stock/Book Value 
of Debt 
Sales/Total Assets 
Two Output Variables 
Solvent Firms 
Bankrupt Firms 
An ANN model to Predict a Firm’s Bankruptcy
Advantages of ANN 
• Parallel Processing 
• Generalization 
– a great deal of noise and randomness can 
be tolerated 
• Fault tolerance 
– damage to a few units and weights may 
not be fatal to the overall network 
performance
Properties of ANN 
• No special recovery mechanism is 
required for incomplete information 
• Learning capability
Disadvantages of ANN 
• Black box 
– Difficulty to interpret information on the 
network 
• Complicated Algorithms

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Artificial Intelligence: Artificial Neural Networks

  • 1. Artificial Neural Networks (ANN) • Human information processing takes place through the interaction of many billions of neurons connected to each other, each sending excitatory or inhibitory signals to other neurons (excite in positive/suppress in negative) • Human Brain: Parallel Processing + excites - supresses + - - + + - +
  • 2. ANN • The neuron receives signals from other neurons, collects the input signals, and transforms the collected input signal • The single neuron then transmits the transformed signal to other neurons
  • 3. ANN • The signals that pass through the junction, known as synapses, are either weakened or strengthened depending upon the strength of the synaptic connection • By modifying synaptic strengths, the human brain is able to store knowledge and thus allow certain inputs to result in specific output or behavior • Translates into a mathematical model • Artificial Neural Networks compare weights – Synopsis is small = - – Synopsis is large = + • ON = + • OFF = - • Neurons are trained – Neurons are on (+) or off (-) • Example: Could be Facial Recognition
  • 4. ANN • A basic ANN model consists of – Computational units – Links • A unit emulate the functions of a neuron • Computational units are connected by links with variable weights which represent synapses in the biological model (Human Brain) • Learning Curve: Change synopsis in face recognition – Changes & learns new info
  • 5. ANN • The unit receives a weighted sum of all its input via connections and computes its own output value using its own output function • The output value is then propagated to many other units via connection between units
  • 6. Basic Representation • Parallel Transfer – Some connections bi-directional, some one-way • Variation of algorithms – 2 levels – Multi-levels • y=f (x1, x2, x3) – where is is a transform function (linear or non-linear)
  • 7. Basic Representation Sum: Netj = Sum of Wji Xi Transfer: Yj = F (Netj ) S u m Transfer X1 X2 X3 jth Computational Unit Weights Wj1 Wj2 Wj3 Yj Output Path
  • 8. ANN • Computational units in ANN are arranged in layers - input, output, and hidden layers • Units in a hidden layer are called hidden units
  • 9. Hidden Units • Hidden unit is a unit which represents neither input nor output variables • It is used to support the required function from input to output
  • 13. ANN Learning Algorithm Supervised Learning Unsupervised Learning Binary Input Continued Binary Continued Hopfield Net Perceptron ART I ART II Boltzman- Backpropagation Self-organizing Machine (popular algorithm widely used) Map
  • 14. Backpropagation • The algorithm is a learning rule which suggests a way of modifying weights to represent a function from input to output • The network architecture is a feedforward network where computational units are structured in a multi-layered network: an input layer, one or more hidden layer(s), and an output layer
  • 15. Backpropagation • The units on a layer have full connections to units on the adjacent layers, but no connection to units on the same layer
  • 16. Backpropagation • Calculate the difference (error) between the expected and actual output value • Adjust the weights in order to minimize the error • Minimize the error by performing a gradient decent on the error surface
  • 17. Backpropagation • The amount of the weight change for each input pattern in an epoch is proportional to the error • An epoch is completed after the network sees all of the input and output pairs
  • 18. Five Input Var. Net Working Capital/Total Assets Retained Earning/Total Assets EBIT/Total Assets Market Value of Common and Preferred Stock/Book Value of Debt Sales/Total Assets Two Output Variables Solvent Firms Bankrupt Firms An ANN model to Predict a Firm’s Bankruptcy
  • 19. Advantages of ANN • Parallel Processing • Generalization – a great deal of noise and randomness can be tolerated • Fault tolerance – damage to a few units and weights may not be fatal to the overall network performance
  • 20. Properties of ANN • No special recovery mechanism is required for incomplete information • Learning capability
  • 21. Disadvantages of ANN • Black box – Difficulty to interpret information on the network • Complicated Algorithms