An academic review: applications of data mining techniques in finance industry

With the development of Internet techniques, data volumes are doubling every two years, faster than predicted by Moore’s Law. Big Data Analytics becomes particularly important for enterprise business. Modern computational technologies will provide effective tools to help understand hugely accumulated data and leverage this information to get insights into the finance industry. In order to get actionable insights into the business, data has become most valuable asset of financial organisations, as there are no physical products in finance industry to manufacture. This is where data mining techniques come to their rescue by allowing access to the right information at the right time. These techniques are used by the finance industry in various areas such as fraud detection, intelligent forecasting, credit rating, loan management, customer profiling, money laundering, marketing and prediction of price movements to name a few. This work aims to survey the research on data mining techniques applied to the finance industry from 2010 to 2015.The review finds that Stock prediction and Credit rating have received most attention of researchers, compared to Loan prediction, Money Laundering and Time Series prediction. Due to the dynamics, uncertainty and variety of data, nonlinear mapping techniques have been deeply studied than linear techniques. Also it has been proved that hybrid methods are more accurate in prediction, closely followed by Neural Network technique. This survey could provide a clue of applications of data mining techniques for finance industry, and a summary of methodologies for researchers in this area. Especially, it could provide a good vision of Data Mining Techniques in computational finance for beginners who want to work in the field of computational finance

A Comprehensive Survey on Particle Swarm Optimization Algorithm and Its Applications

Particle swarm optimization (PSO) is a heuristic global optimization method, proposed originally by Kennedy and Eberhart in 1995. It is now one of the most commonly used optimization techniques. This survey presented a comprehensive investigation of PSO. On one hand, we provided advances with PSO, including its modifications (including quantum-behaved PSO, bare-bones PSO, chaotic PSO, and fuzzy PSO), population topology (as fully connected, von Neumann, ring, star, random, etc.), hybridization (with genetic algorithm, simulated annealing, Tabu search, artificial immune system, ant colony algorithm, artificial bee colony, differential evolution, harmonic search, and biogeography-based optimization), extensions (to multiobjective, constrained, discrete, and binary optimization), theoretical analysis (parameter selection and tuning, and convergence analysis), and parallel implementation (in multicore, multiprocessor, GPU, and cloud computing forms). On the other hand, we offered a survey on applications of PSO to the following eight fields: electrical and electronic engineering, automation control systems, communication theory, operations research, mechanical engineering, fuel and energy, medicine, chemistry, and biology. It is hoped that this survey would be beneficial for the researchers studying PSO algorithms

A Financial Embedded Vector Model and Its Applications to Time Series Forecasting

Inspired by the embedding representation in Natural Language Processing (NLP), we develop a financial embedded vector representation model to abstract the temporal characteristics of financial time series. Original financial features are discretized firstly, and then each set of discretized features is considered as a “word” of NLP, while the whole financial time series corresponds to the “sentence” or “paragraph”. Therefore the embedded vector models in NLP could be applied to the financial time series. To test the proposed model, we use RBF neural networks as regression model to predict financial series by comparing the financial embedding vectors as input with the original features. Numerical results show that the prediction accuracy of the test data is improved for about 4-6 orders of magnitude, meaning that the financial embedded vector has a strong generalization ability

The Modeling of Interval-Valued Time Series Using Possibility Measure-Based Encoding-Decoding Mechanism

Interval-valued time series (ITS) is a collection of interval-valued data whose entires are ordered by time. The modeling of ITS is an ongoing issue pursued by many researchers. There are diverse ITS models showing better performance. This paper proposes a new ITS model using possibility measure-based encoding-decoding mechanism involved in fuzzy theory. The proposed model consists of four modules, say, linguistic variable generation module, encoding module, inference module and decoding module. The linguistic variable generation module can provide a series of linguistic variables expressed in fuzzy sets used to described dynamic characteristics of ITS. The encoding module encodes ITS into some embedding vectors with semantics with the aid of possibility measure and linguistic variables formed by linguistic variable generation module. The inference module uses artificial neural network to capture relationship implied in those embedding vectors with semantic. The decoding module decodes for the outputs of the inference module to produce the output of linguistic and interval formats by using the possibility measure-based encoding-decoding mechanism. In comparison with existing ITS models, the proposed model can not only produce the output of linguistic format, but also exhibit better numeric performance

Data mining in computational finance

Computational finance is a relatively new discipline whose birth can be traced back to early 1950s. Its major objective is to develop and study practical models focusing on techniques that apply directly to financial analyses. The large number of decisions and computationally intensive problems involved in this discipline make data mining and machine learning models an integral part to improve, automate, and expand the current processes. One of the objectives of this research is to present a state-of-the-art of the data mining and machine learning techniques applied in the core areas of computational finance. Next, detailed analysis of public and private finance datasets is performed in an attempt to find interesting facts from data and draw conclusions regarding the usefulness of features within the datasets. Credit risk evaluation is one of the crucial modern concerns in this field. Credit scoring is essentially a classification problem where models are built using the information about past applicants to categorise new applicants as ‘creditworthy’ or ‘non-creditworthy’. We appraise the performance of a few classical machine learning algorithms for the problem of credit scoring. Typically, credit scoring databases are large and characterised by redundant and irrelevant features, making the classification task more computationally-demanding. Feature selection is the process of selecting an optimal subset of relevant features. We propose an improved information-gain directed wrapper feature selection method using genetic algorithms and successfully evaluate its effectiveness against baseline and generic wrapper methods using three benchmark datasets. One of the tasks of financial analysts is to estimate a company’s worth. In the last piece of work, this study predicts the growth rate for earnings of companies using three machine learning techniques. We employed the technique of lagged features, which allowed varying amounts of recent history to be brought into the prediction task, and transformed the time series forecasting problem into a supervised learning problem. This work was applied on a private time series dataset

Computational Optimizations for Machine Learning

The present book contains the 10 articles finally accepted for publication in the Special Issue “Computational Optimizations for Machine Learning” of the MDPI journal Mathematics, which cover a wide range of topics connected to the theory and applications of machine learning, neural networks and artificial intelligence. These topics include, among others, various types of machine learning classes, such as supervised, unsupervised and reinforcement learning, deep neural networks, convolutional neural networks, GANs, decision trees, linear regression, SVM, K-means clustering, Q-learning, temporal difference, deep adversarial networks and more. It is hoped that the book will be interesting and useful to those developing mathematical algorithms and applications in the domain of artificial intelligence and machine learning as well as for those having the appropriate mathematical background and willing to become familiar with recent advances of machine learning computational optimization mathematics, which has nowadays permeated into almost all sectors of human life and activity

A Multi-type Classifier Ensemble for Detecting Fake Reviews Through Textualbased Feature Extraction

The financial impact of online reviews has prompted some fraudulent sellers to generate fake consumer reviews for either promoting their products or discrediting competing products. In this study, we propose a novel ensemble model - the Multitype Classifier Ensemble (MtCE) - combined with a textual-based featuring method, which is relatively independent of the system, to detect fake online consumer reviews. Unlike other ensemble models that utilise only the same type of single classifier, our proposed ensemble utilises several customised machine learning classifiers (including deep learning models) as its base classifiers. The results of our experiments show that the MtCE can adequately detect fake reviews, and that it outperforms other single and ensemble methods in terms of accuracy and other measurements in all the relevant public datasets used in this study. Moreover, if set correctly, the parameters of MtCE, such as base-classifier types, the total number of base classifiers, bootstrap and the method to vote on output (e.g., majority or priority), further improve the performance of the proposed ensemble

Particle Swarm Optimization

Particle swarm optimization (PSO) is a population based stochastic optimization technique influenced by the social behavior of bird flocking or fish schooling.PSO shares many similarities with evolutionary computation techniques such as Genetic Algorithms (GA). The system is initialized with a population of random solutions and searches for optima by updating generations. However, unlike GA, PSO has no evolution operators such as crossover and mutation. In PSO, the potential solutions, called particles, fly through the problem space by following the current optimum particles. This book represents the contributions of the top researchers in this field and will serve as a valuable tool for professionals in this interdisciplinary field

A NOVEL METAHEURISTIC ALGORITHM: DYNAMIC VIRTUAL BATS ALGORITHM FOR GLOBAL OPTIMIZATION

A novel nature-inspired algorithm called the Dynamic Virtual Bats Algorithm (DVBA) is presented in this thesis. DVBA is inspired by a bat’s ability to manipulate frequency and wavelength of the emitted sound waves when hunting. A role based search has been developed to improve the diversification and intensification capability of standard Bat Algorithm (BA). Although DVBA is inspired from bats, like BA, it is conceptually very different from BA. BA needs a huge number of population size; however, DVBA employs just two bats to handle the ”exploration and exploitation” conflict which is known as a real challenge for all optimization algorithms. Firstly, we study bat’s echolocation ability and next, the most known bat-inspired algorithm and its modified versions are analyzed. The contributions of this thesis start reading and imitating bat’s hunting strategies with different perspectives. In the DVBA, there are only two bats: explorer and exploiter bat. While the explorer bat explores the search space, the exploiter bat makes an intensive search of the local with the highest probability of locating the desired target. Depending on their location, bats exchange the roles dynamically. The performance of the DVBA is extensively evaluated on a suite of 30 bound-constrained optimization problems from Congress of Evolutionary Computation (CEC) 2014 and compared with 4 classical optimization algorithm, 4 state-of-the-art modified bat algorithms, and 5 algorithms from a special session at CEC2014. In addition, DVBA is tested on supply chain cost problem to see its performance on a complicated real world problem. The experimental results demonstrated that the proposed DVBA outperform, or is comparable to, its competitors in terms of the quality of final solution and its convergence rates.Epoka Universit

Optimization Methods Applied to Power Systems Ⅱ

Electrical power systems are complex networks that include a set of electrical components that allow distributing the electricity generated in the conventional and renewable power plants to distribution systems so it can be received by final consumers (businesses and homes). In practice, power system management requires solving different design, operation, and control problems. Bearing in mind that computers are used to solve these complex optimization problems, this book includes some recent contributions to this field that cover a large variety of problems. More specifically, the book includes contributions about topics such as controllers for the frequency response of microgrids, post-contingency overflow analysis, line overloads after line and generation contingences, power quality disturbances, earthing system touch voltages, security-constrained optimal power flow, voltage regulation planning, intermittent generation in power systems, location of partial discharge source in gas-insulated switchgear, electric vehicle charging stations, optimal power flow with photovoltaic generation, hydroelectric plant location selection, cold-thermal-electric integrated energy systems, high-efficiency resonant devices for microwave power generation, security-constrained unit commitment, and economic dispatch problems