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Machine Learning for Finance

You're reading from   Machine Learning for Finance Principles and practice for financial insiders

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Product type Paperback
Published in May 2019
Publisher Packt
ISBN-13 9781789136364
Length 456 pages
Edition 1st Edition
Languages
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Authors (2):
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Jannes Klaas Jannes Klaas
Author Profile Icon Jannes Klaas
Jannes Klaas
James Le James Le
Author Profile Icon James Le
James Le
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Toc

Table of Contents (15) Chapters Close

Machine Learning for Finance
Contributors
Preface
Other Books You May Enjoy
1. Neural Networks and Gradient-Based Optimization 2. Applying Machine Learning to Structured Data FREE CHAPTER 3. Utilizing Computer Vision 4. Understanding Time Series 5. Parsing Textual Data with Natural Language Processing 6. Using Generative Models 7. Reinforcement Learning for Financial Markets 8. Privacy, Debugging, and Launching Your Products 9. Fighting Bias 10. Bayesian Inference and Probabilistic Programming Index

Tensors and the computational graph


Tensors are arrays of numbers that transform based on specific rules. The simplest kind of tensor is a single number. This is also called a scalar. Scalars are sometimes referred to as rank-zero tensors.

The next tensor is a vector, also known as a rank-one tensor. The next The next ones up the order are matrices, called rank-two tensors; cube matrices, called rank-three tensors; and so on. You can see the rankings in the following table:

Rank

Name

Expresses

0

Scalar

Magnitude

1

Vector

Magnitude and Direction

2

Matrix

Table of numbers

3

Cube Matrix

Cube of numbers

n

n-dimensional matrix

You get the idea

This book mostly uses the word tensor for rank-three or higher tensors.

TensorFlow and every other deep learning library perform calculations along a computational graph. In a computational graph, operations, such as matrix multiplication or an activation function, are nodes in a network. Tensors get passed along the edges of the graph between the different operations.

A forward pass through our simple neural network has the following graph:

A simple computational graph

The advantage of structuring computations as a graph is that it's easier to run nodes in parallel. Through parallel computation, we do not need one very fast machine; we can also achieve fast computation with many slow computers that split up the tasks.

This is the reason why GPUs are so useful for deep learning. GPUs have many small cores, as opposed to CPUs, which only have a few fast cores. A modern CPU might only have four cores, whereas a modern GPU can have hundreds or even thousands of cores.

The entire graph of just a very simple model can look quite complex, but you can see the components of the dense layer. There is a matrix multiplication (matmul), adding bias and a ReLU activation function:

The computational graph of a single layer in TensorFlow. Screenshot from TensorBoard.

Another advantage of using computational graphs such as this is that TensorFlow and other libraries can quickly and automatically calculate derivatives along this graph. As we have explored throughout this chapter, calculating derivatives is key for training neural networks.

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