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Machine Learning for Algorithmic Trading

You're reading from   Machine Learning for Algorithmic Trading Predictive models to extract signals from market and alternative data for systematic trading strategies with Python

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Product type Paperback
Published in Jul 2020
Publisher Packt
ISBN-13 9781839217715
Length 820 pages
Edition 2nd Edition
Languages
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Author (1):
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Stefan Jansen Stefan Jansen
Author Profile Icon Stefan Jansen
Stefan Jansen
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Table of Contents (27) Chapters Close

Preface 1. Machine Learning for Trading – From Idea to Execution 2. Market and Fundamental Data – Sources and Techniques FREE CHAPTER 3. Alternative Data for Finance – Categories and Use Cases 4. Financial Feature Engineering – How to Research Alpha Factors 5. Portfolio Optimization and Performance Evaluation 6. The Machine Learning Process 7. Linear Models – From Risk Factors to Return Forecasts 8. The ML4T Workflow – From Model to Strategy Backtesting 9. Time-Series Models for Volatility Forecasts and Statistical Arbitrage 10. Bayesian ML – Dynamic Sharpe Ratios and Pairs Trading 11. Random Forests – A Long-Short Strategy for Japanese Stocks 12. Boosting Your Trading Strategy 13. Data-Driven Risk Factors and Asset Allocation with Unsupervised Learning 14. Text Data for Trading – Sentiment Analysis 15. Topic Modeling – Summarizing Financial News 16. Word Embeddings for Earnings Calls and SEC Filings 17. Deep Learning for Trading 18. CNNs for Financial Time Series and Satellite Images 19. RNNs for Multivariate Time Series and Sentiment Analysis 20. Autoencoders for Conditional Risk Factors and Asset Pricing 21. Generative Adversarial Networks for Synthetic Time-Series Data 22. Deep Reinforcement Learning – Building a Trading Agent 23. Conclusions and Next Steps 24. References
25. Index
Appendix: Alpha Factor Library

Designing an NN

DL relies on NNs, which consist of a few key building blocks, which in turn can be configured in a multitude of ways. In this section, we introduce how NNs work and illustrate their most important components used to design different architectures.

(Artificial) NNs were originally inspired by biological models of learning like the human brain, either in an attempt to mimic how it works and achieve similar success, or to gain a better understanding through simulation. Current NN research draws less on neuroscience, not least since our understanding of the brain has not yet reached a sufficient level of granularity. Another constraint is overall size: even if the number of neurons used in NNs continued to double every year since their inception in the 1950s, they would only reach the scale of the human brain around 2050.

We will also explain how backpropagation, often simply called backprop, uses gradient information (the value of the partial derivative of the...

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