Modeling Financial Time Series with Artificial Neural Networks

Financial time series convey the decisions and actions of a population of human actors over time. Econometric and regressive models have been developed in the past decades for analyzing these time series. More recently, biologically inspired artificial neural network models have been shown to overcome some of the main challenges of traditional techniques by better exploiting the non-linear, non-stationary, and oscillatory nature of noisy, chaotic human interactions. This review paper explores the options, benefits, and weaknesses of the various forms of artificial neural networks as compared with regression techniques in the field of financial time series analysis.CELEST, a National Science Foundation Science of Learning Center (SBE-0354378); SyNAPSE program of the Defense Advanced Research Project Agency (HR001109-03-0001

Definition of valid proteomic biomarkers: a bayesian solution

Clinical proteomics is suffering from high hopes generated by reports on apparent biomarkers, most of which could not be later substantiated via validation. This has brought into focus the need for improved methods of finding a panel of clearly defined biomarkers. To examine this problem, urinary proteome data was collected from healthy adult males and females, and analysed to find biomarkers that differentiated between genders. We believe that models that incorporate sparsity in terms of variables are desirable for biomarker selection, as proteomics data typically contains a huge number of variables (peptides) and few samples making the selection process potentially unstable. This suggests the application of a two-level hierarchical Bayesian probit regression model for variable selection which assumes a prior that favours sparseness. The classification performance of this method is shown to improve that of the Probabilistic K-Nearest Neighbour model

Intelligent Financial Fraud Detection Practices: An Investigation

Financial fraud is an issue with far reaching consequences in the finance industry, government, corporate sectors, and for ordinary consumers. Increasing dependence on new technologies such as cloud and mobile computing in recent years has compounded the problem. Traditional methods of detection involve extensive use of auditing, where a trained individual manually observes reports or transactions in an attempt to discover fraudulent behaviour. This method is not only time consuming, expensive and inaccurate, but in the age of big data it is also impractical. Not surprisingly, financial institutions have turned to automated processes using statistical and computational methods. This paper presents a comprehensive investigation on financial fraud detection practices using such data mining methods, with a particular focus on computational intelligence-based techniques. Classification of the practices based on key aspects such as detection algorithm used, fraud type investigated, and success rate have been covered. Issues and challenges associated with the current practices and potential future direction of research have also been identified.Comment: Proceedings of the 10th International Conference on Security and Privacy in Communication Networks (SecureComm 2014