Evolutionary Algorithms and Computational Methods for Derivatives Pricing

This work aims to provide novel computational solutions to the problem of derivative pricing. To achieve this, a novel hybrid evolutionary algorithm (EA) based on particle swarm optimisation (PSO) and differential evolution (DE) is introduced and applied, along with various other state-of-the-art variants of PSO and DE, to the problem of calibrating the Heston stochastic volatility model. It is found that state-of-the-art DEs provide excellent calibration performance, and that previous use of rudimentary DEs in the literature undervalued the use of these methods. The use of neural networks with EAs for approximating the solution to derivatives pricing models is next investigated. A set of neural networks are trained from Monte Carlo (MC) simulation data to approximate the closed form solution for European, Asian and American style options. The results are comparable to MC pricing, but with offline evaluation of the price using the neural networks being orders of magnitudes faster and computationally more efficient. Finally, the use of custom hardware for numerical pricing of derivatives is introduced. The solver presented here provides an energy efficient data-flow implementation for pricing derivatives, which has the potential to be incorporated into larger high-speed/low energy trading systems

Smart Distributed Processing Technologies For Hedge Fund Management

Distributed processing cluster design using commodity hardware and software has proven to be a technological breakthrough in the field of parallel and distributed computing. The research presented herein is the original investigation on distributed processing using hybrid processing clusters to improve the calculation efficiency of the compute-intensive applications. This has opened a new frontier in affordable supercomputing that can be utilised by businesses and industries at various levels. Distributed processing that uses commodity computer clusters has become extremely popular over recent years, particularly among university research groups and research organisations. The research work discussed herein addresses a bespoke-oriented design and implementation of highly specific and different types of distributed processing clusters with applied load balancing techniques that are well suited for particular business requirements. The research was performed in four phases, which are cohesively interconnected, to find a suitable solution using a new type of distributed processing approaches. The first phase is an implementation of a bespoke-type distributed processing cluster using an existing network of workstations as a calculation cluster based on a loosely coupled distributed process system design that has improved calculation efficiency of certain legacy applications. This approach has demonstrated how to design an innovative, cost-effective, and efficient way to utilise a workstation cluster for distributed processing. The second phase is to improve the calculation efficiency of the distributed processing system; a new type of load balancing system is designed to incorporate multiple processing devices. The load balancing system incorporates hardware, software and application related parameters to assigned calculation tasks to each processing devices accordingly. Three types of load balancing methods are tested, static, dynamic and hybrid, which each of them has their own advantages, and all three of them have further improved the calculation efficiency of the distributed processing system.   The third phase is to facilitate the company to improve the batch processing application calculation time, and two separate dedicated calculation clusters are built using small form factor (SFF) computers and PCs as separate peer-to-peer (P2P) network based calculation clusters. Multiple batch processing applications were tested on theses clusters, and the results have shown consistent calculation time improvement across all the applications tested. In addition, dedicated clusters are built using SFF computers with reduced power consumption, small cluster size, and comparatively low cost to suit particular business needs. The fourth phase incorporates all the processing devices available in the company as a hybrid calculation cluster utilises various type of servers, workstations, and SFF computers to form a high-throughput distributed processing system that consolidates multiple calculations clusters. These clusters can be utilised as multiple mutually exclusive multiple clusters or combined as a single cluster depending on the applications used. The test results show considerable calculation time improvements by using consolidated calculation cluster in conjunction with rule-based load balancing techniques. The main design concept of the system is based on the original design that uses first principle methods and utilises existing LAN and separate P2P network infrastructures, hardware, and software. Tests and investigations conducted show promising results where the company’s legacy applications can be modified and implemented with different types of distributed processing clusters to achieve calculation and processing efficiency for various applications within the company. The test results have confirmed the expected calculation time improvements in controlled environments and show that it is feasible to design and develop a bespoke-type dedicated distributed processing cluster using existing hardware, software, and low-cost SFF computers. Furthermore, a combination of bespoke distributed processing system with appropriate load balancing algorithms has shown considerable calculation time improvements for various legacy and bespoke applications. Hence, the bespoke design is better suited to provide a solution for the calculation of time improvements for critical problems currently faced by the sponsoring company

Recommender Systems for Grocery Retail - A Machine Learning Approach

Recommender systems are present in our daily activities in different moments, such as when choosing a song to listen to or when doing online shopping. It is an everyday reality for people to have the help of computer systems in order to simplify regular decision activities. Grocery shopping is an essential part of people’s life and a frequent activity. Despite being a common habit, each customer has unique routines, needs and preferences regarding products and brands. This information is valuable for grocery retailers to know their customers better and to improve their marketing and operational activities. This dissertation aims to apply machine learning algorithms to the development of a recommender system capable of preparing personalized grocery shopping lists. The proposed architecture is designed to allow integration with different grocery retailers and support distinct TensorFlow algorithms. The process of extracting information from the dataset as features was explored, as well as the tuning of the model hyperparameters, to obtain better results. The recommendation engine is exposed via a distributed software architecture designed to allow retailers to integrate the recommender system with different existing solutions (e.g., websites or mobile applications). A case study to validate the implemented solution was performed, integrating it with a public dataset provided by Instacart. A comparison study between different machine learning algorithms over the adopted dataset has lead to the choice of the gradient boosted trees algorithm. The solution developed in the case study was compared against two non-machine learning approaches at predicting the last purchase of 360 arbitrary test customers. A pattern miningbased solution and a SQL-based heuristic were used. Different evaluation metrics (namely, the average accuracy, precision, recall, and f1-score) were registered. The way association rules with different strengths were reflected in the predictions of the developed solution was also analyzed. The gradient boosted trees-based implementation from the case study was capable of outperforming the compared solutions as far as evaluation metrics are concerned, and has shown a higher capability of predicting at least one correct item per customer. Also, it became evident that the strictest association rules were frequently found in the recommendations. The adopted solution and algorithm have shown promising results and a remarkable capability to provide meaningful predictions to the different customers, evidencing its capability to add value to grocery retail. Nevertheless, there is still potential for further expansion.Os sistemas de recomendação estão presentes no nosso quotidiano, em momentos como a escolha da música a ouvir ou a preparação de compras online. Estamos acostumados a contar com a ajuda de sistemas computacionais para simplificar tarefas habituais que envolvem decisões. Realizar compras de retalho alimentar é uma parte importante e frequente da nossa vida. Apesar de ser um hábito comum, cada um de nós tem as suas próprias rotinas, necessidades e preferências no que toca a produtos e marcas. Esta informação é valiosa para que os retalhistas alimentares consigam conhecer melhor os seus clientes e melhorar atividades operacionais e de marketing. Esta dissertação tem como objetivo a aplicação de algoritmos de machine learning na criação de um sistema de recomendação capaz de preparar listas de compras personalizadas. A arquitetura proposta é desenhada com o objetivo de permitir a integração com diferentes retalhistas e a utilização de diferentes algoritmos em TensorFlow. O processo de extração de informação na forma de features foi explorado, tal como a afinação dos hiperparâmetros do modelo, para obter melhores resultados. O motor de recomendações é exposto através de uma arquitetura de software distribuída, com o propósito de permitir que os retalhistas alimentares possam integrar este sistema com diferentes soluções existentes (e.g., websites ou aplicações móveis). Foi realizado um caso de estudo para validar a solução implementada, através da integração da solução com os dados públicos disponibilizados pelo retalhista Instacart. Uma comparação entre a aplicação de diferentes algoritmos de machine learning aos dados utilizados, levou à adoção do algoritmo gradient boosted trees. A solução desenvolvida no caso de estudo foi comparada com duas abordagens não baseadas em machine learning para a previsão da última compra de 360 clientes arbitrários. Foi usada uma abordagem baseada em pattern mining e uma abordagem baseada em SQL. Diferentes métricas de avaliação (nomeadamente accuracy, precision, recall e f1-score médios) foram registadas. Foi também analisada a forma como diferentes regras de associação se encontraram refletidas nas recomendações da solução desenvolvida. A implementação baseada em gradient boosted trees do caso de estudo superou as soluções com as quais foi comparada quanto às métricas de avaliação, e mostrou uma maior capacidade de recomendar pelo menos um produto correto por cliente. Verificou-se também que as regras de associação mais fortes estão frequentemente refletidas nas recomendações. A abordagem adotada e o algoritmo aprofundado mostraram resultados promissores e uma capacidade notável de fornecer recomendações úteis aos diferentes clientes, evidenciando a sua aptidão para adicionar valor ao retalho alimentar. Ainda assim, este sistema apresenta um elevado potencial para expansão