Overview
- Introduces a novel quantitative investment approach that handles highly uncertain markets
- Guides the reader step by step towards a very practical portfolio construction
- Provides new explicit quantitative trading strategies
Part of the book series: Financial Mathematics and Fintech (FMF)
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About this book
This book introduces the novel artificial intelligence technique of polymodels and applies it to the prediction of stock returns. The idea of polymodels is to describe a system by its sensitivities to an environment, and to monitor it, imitating what a natural brain does spontaneously. In practice this involves running a collection of non-linear univariate models. This very powerful standalone technique has several advantages over traditional multivariate regressions. With its easy to interpret results, this method provides an ideal preliminary step towards the traditional neural network approach.
The first two chapters compare the technique with other regression alternatives and introduces an estimation method which regularizes a polynomial regression using cross-validation. The rest of the book applies these ideas to financial markets. Certain equity return components are predicted using polymodels in very different ways, and a genetic algorithm is describedwhich combines these different predictions into a single portfolio, aiming to optimize the portfolio returns net of transaction costs. Addressed to investors at all levels of experience this book will also be of interest to both seasoned and non-seasoned statisticians.
The first two chapters compare the technique with other regression alternatives and introduces an estimation method which regularizes a polynomial regression using cross-validation. The rest of the book applies these ideas to financial markets. Certain equity return components are predicted using polymodels in very different ways, and a genetic algorithm is describedwhich combines these different predictions into a single portfolio, aiming to optimize the portfolio returns net of transaction costs. Addressed to investors at all levels of experience this book will also be of interest to both seasoned and non-seasoned statisticians.
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Keywords
Table of contents (8 chapters)
Authors and Affiliations
About the authors
Thomas Barrau is a Senior Quantitative Researcher working in the hedge fund AXA
Investment Managers Chorus Ltd. He is working on the development of an Equity Market
Neutral portfolio, from the creation of quantitative trading strategies to the portfolio
construction. Prior to this, he worked at Societe Generale as banker and financial advisor
to small businesses, and as CFO in an aerospace company. He holds a PhD in Applied
Mathematics from Paris 1 Pantheon-Sorbonne University. Previously, he validated with
honors three different Masters of Science from Aix-Marseille School of Economics,
Ca'Foscari University of Venice and Poitiers IAE.
Investment Managers Chorus Ltd. He is working on the development of an Equity Market
Neutral portfolio, from the creation of quantitative trading strategies to the portfolio
construction. Prior to this, he worked at Societe Generale as banker and financial advisor
to small businesses, and as CFO in an aerospace company. He holds a PhD in Applied
Mathematics from Paris 1 Pantheon-Sorbonne University. Previously, he validated with
honors three different Masters of Science from Aix-Marseille School of Economics,
Ca'Foscari University of Venice and Poitiers IAE.
Raphael Douady is a French mathematician and economist specializing in data science, financial mathematics and chaos theory at the University of Paris I-Panthéon-Sorbonne. He formerly held the Frey Chair of quantitative finance at Stony Brook University and was academic director of the French Laboratory of Excellence on Financial Regulation. He earned his PhD in Hamiltonian dynamics and has more than 25 years of experience in the financial industry. He has particular interest in researching portfolio risks, for which he has developed especially suited powerful nonlinear statistical and data science models, as well as macroeconomics and systemic risk. He founded fin tech firms Riskdata (risk management for the buyside) and Datacore (quantitative portfolio of ETFs) and is Chief Science Officer of NM Fin tech (numerical methods for fixed income trading in China).
Bibliographic Information
Book Title: Artificial Intelligence for Financial Markets
Book Subtitle: The Polymodel Approach
Authors: Thomas Barrau, Raphael Douady
Series Title: Financial Mathematics and Fintech
DOI: https://doi.org/10.1007/978-3-030-97319-3
Publisher: Springer Cham
eBook Packages: Mathematics and Statistics, Mathematics and Statistics (R0)
Copyright Information: The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022
Hardcover ISBN: 978-3-030-97318-6Published: 01 June 2022
Softcover ISBN: 978-3-030-97321-6Published: 02 June 2023
eBook ISBN: 978-3-030-97319-3Published: 31 May 2022
Series ISSN: 2662-7167
Series E-ISSN: 2662-7175
Edition Number: 1
Number of Pages: XIV, 172
Number of Illustrations: 29 b/w illustrations, 58 illustrations in colour
Topics: Applications of Mathematics