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A fixed income analyst is trying evaluating the probablity of default of a high yield bond using a neural network. Which type of activation function would he be LEAST likely to use?ALinear functionBLogistic functionCHyperbolic functionDRELU Function

Question

A fixed income analyst is trying evaluating the probablity of default of a high yield bond using a neural network. Which type of activation function would he be LEAST likely to use?ALinear functionBLogistic functionCHyperbolic functionDRELU Function

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Solution

The least likely activation function to be used in this scenario would be A) Linear function.

The reason is that linear functions are not suitable for complex tasks because they are unable to capture the non-linear relationships in the data. In the case of evaluating the probability of default of a high yield bond, the relationship between the input variables (such as the bond's yield, the issuer's credit rating, etc.) and the output variable (the probability of default) is likely to be non-linear.

On the other hand, logistic, hyperbolic and ReLU (Rectified Linear Unit) functions are non-linear activation functions that can capture these non-linear relationships, making them more suitable for this task.

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