Re: Confuxion Matrix and Cost Matrix
by janek - Monday, January 16, 2017, 13:06:40

Hello,

The understanding of the notion of a confusion matrix in the evaluation is pretty standard. You may read more about it, e.g. on Wikipedia:
https://en.wikipedia.org/wiki/Confusion_matrix

Regarding the cost matrix C, you may consider it as a cost and reward matrix. If you take a closer look at the formula for computing a value of ACC (see the bottom of the description https://knowledgepit.fedcsis.org/mod/page/view.php?id=1012), you will notice that values from the diagonal of C appear in the numerator and denominator of a fraction, while the other values appear only in the denominator. 

For instance, in the present form, the penalty for wrongly predicting 'Buy' when the true class was 'Sell' is the same as the reward for a correct classification of a 'Sell' instance. However, if you predict 'Buy' and the actual class is 'Hold', then the penalty will be only a half as high as in the first case.

The cost matrix was proposed by experts from mBank.

Best regards,
Andrzej Janusz