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http://dx.doi.org/10.30693/SMJ.2022.11.3.9

Ensemble trading algorithm Using Dirichlet distribution-based model contribution prediction  

Jeong, Jae Yong (인하대학교 전기컴퓨터공학과)
Lee, Ju Hong (인하대학교 컴퓨터공학과)
Choi, Bum Ghi (인하대학교 컴퓨터공학과)
Song, Jae Won (밸류파인더스)
Publication Information
Smart Media Journal / v.11, no.3, 2022 , pp. 9-17 More about this Journal
Abstract
Algorithmic trading, which uses algorithms to trade financial products, has a problem in that the results are not stable due to many factors in the market. To alleviate this problem, ensemble techniques that combine trading algorithms have been proposed. However, there are several problems with this ensemble method. First, the trading algorithm may not be selected so as to satisfy the minimum performance requirement (more than random) of the algorithm included in the ensemble, which is a necessary requirement of the ensemble. Second, there is no guarantee that an ensemble model that performed well in the past will perform well in the future. In order to solve these problems, a method for selecting trading algorithms included in the ensemble model is proposed as follows. Based on past data, we measure the contribution of the trading algorithms included in the ensemble models with high performance. However, for contributions based only on this historical data, since there are not enough past data and the uncertainty of the past data is not reflected, the contribution distribution is approximated using the Dirichlet distribution, and the contribution values are sampled from the contribution distribution to reflect the uncertainty. Based on the contribution distribution of the trading algorithm obtained from the past data, the Transformer is trained to predict the future contribution. Trading algorithms with high predicted future contribution are selected and included in the ensemble model. Through experiments, it was proved that the proposed ensemble method showed superior performance compared to the existing ensemble methods.
Keywords
ensemble; trading algorithm; Dirichlet distribution; Transformer;
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