• Journal of Intelligence and Information Systems
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• v.16 no.2
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• pp.19-32
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• 2010

Volatility plays a central role in both academic and practical applications, especially in pricing financial derivative products and trading volatility strategies. This study presents a novel mechanism based on generalized autoregressive conditional heteroskedasticity (GARCH) models that is able to enhance the performance of intelligent volatility trading systems by predicting Korean stock market volatility more accurately. In particular, we embedded the concept of the volatility asymmetry documented widely in the literature into our model. The newly developed Korean stock market volatility index of KOSPI 200, VKOSPI, is used as a volatility proxy. It is the price of a linear portfolio of the KOSPI 200 index options and measures the effect of the expectations of dealers and option traders on stock market volatility for 30 calendar days. The KOSPI 200 index options market started in 1997 and has become the most actively traded market in the world. Its trading volume is more than 10 million contracts a day and records the highest of all the stock index option markets. Therefore, analyzing the VKOSPI has great importance in understanding volatility inherent in option prices and can afford some trading ideas for futures and option dealers. Use of the VKOSPI as volatility proxy avoids statistical estimation problems associated with other measures of volatility since the VKOSPI is model-free expected volatility of market participants calculated directly from the transacted option prices. This study estimates the symmetric and asymmetric GARCH models for the KOSPI 200 index from January 2003 to December 2006 by the maximum likelihood procedure. Asymmetric GARCH models include GJR-GARCH model of Glosten, Jagannathan and Runke, exponential GARCH model of Nelson and power autoregressive conditional heteroskedasticity (ARCH) of Ding, Granger and Engle. Symmetric GARCH model indicates basic GARCH (1, 1). Tomorrow's forecasted value and change direction of stock market volatility are obtained by recursive GARCH specifications from January 2007 to December 2009 and are compared with the VKOSPI. Empirical results indicate that negative unanticipated returns increase volatility more than positive return shocks of equal magnitude decrease volatility, indicating the existence of volatility asymmetry in the Korean stock market. The point value and change direction of tomorrow VKOSPI are estimated and forecasted by GARCH models. Volatility trading system is developed using the forecasted change direction of the VKOSPI, that is, if tomorrow VKOSPI is expected to rise, a long straddle or strangle position is established. A short straddle or strangle position is taken if VKOSPI is expected to fall tomorrow. Total profit is calculated as the cumulative sum of the VKOSPI percentage change. If forecasted direction is correct, the absolute value of the VKOSPI percentage changes is added to trading profit. It is subtracted from the trading profit if forecasted direction is not correct. For the in-sample period, the power ARCH model best fits in a statistical metric, Mean Squared Prediction Error (MSPE), and the exponential GARCH model shows the highest Mean Correct Prediction (MCP). The power ARCH model best fits also for the out-of-sample period and provides the highest probability for the VKOSPI change direction tomorrow. Generally, the power ARCH model shows the best fit for the VKOSPI. All the GARCH models provide trading profits for volatility trading system and the exponential GARCH model shows the best performance, annual profit of 197.56%, during the in-sample period. The GARCH models present trading profits during the out-of-sample period except for the exponential GARCH model. During the out-of-sample period, the power ARCH model shows the largest annual trading profit of 38%. The volatility clustering and asymmetry found in this research are the reflection of volatility non-linearity. This further suggests that combining the asymmetric GARCH models and artificial neural networks can significantly enhance the performance of the suggested volatility trading system, since artificial neural networks have been shown to effectively model nonlinear relationships.

• Journal of Intelligence and Information Systems
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• v.17 no.4
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• pp.241-254
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• 2011

Financial time-series forecasting is one of the most important issues because it is essential for the risk management of financial institutions. Therefore, researchers have tried to forecast financial time-series using various data mining techniques such as regression, artificial neural networks, decision trees, k-nearest neighbor etc. Recently, support vector machines (SVMs) are popularly applied to this research area because they have advantages that they don't require huge training data and have low possibility of overfitting. However, a user must determine several design factors by heuristics in order to use SVM. For example, the selection of appropriate kernel function and its parameters and proper feature subset selection are major design factors of SVM. Other than these factors, the proper selection of instance subset may also improve the forecasting performance of SVM by eliminating irrelevant and distorting training instances. Nonetheless, there have been few studies that have applied instance selection to SVM, especially in the domain of stock market prediction. Instance selection tries to choose proper instance subsets from original training data. It may be considered as a method of knowledge refinement and it maintains the instance-base. This study proposes the novel instance selection algorithm for SVMs. The proposed technique in this study uses genetic algorithm (GA) to optimize instance selection process with parameter optimization simultaneously. We call the model as ISVM (SVM with Instance selection) in this study. Experiments on stock market data are implemented using ISVM. In this study, the GA searches for optimal or near-optimal values of kernel parameters and relevant instances for SVMs. This study needs two sets of parameters in chromosomes in GA setting : The codes for kernel parameters and for instance selection. For the controlling parameters of the GA search, the population size is set at 50 organisms and the value of the crossover rate is set at 0.7 while the mutation rate is 0.1. As the stopping condition, 50 generations are permitted. The application data used in this study consists of technical indicators and the direction of change in the daily Korea stock price index (KOSPI). The total number of samples is 2218 trading days. We separate the whole data into three subsets as training, test, hold-out data set. The number of data in each subset is 1056, 581, 581 respectively. This study compares ISVM to several comparative models including logistic regression (logit), backpropagation neural networks (ANN), nearest neighbor (1-NN), conventional SVM (SVM) and SVM with the optimized parameters (PSVM). In especial, PSVM uses optimized kernel parameters by the genetic algorithm. The experimental results show that ISVM outperforms 1-NN by 15.32%, ANN by 6.89%, Logit and SVM by 5.34%, and PSVM by 4.82% for the holdout data. For ISVM, only 556 data from 1056 original training data are used to produce the result. In addition, the two-sample test for proportions is used to examine whether ISVM significantly outperforms other comparative models. The results indicate that ISVM outperforms ANN and 1-NN at the 1% statistical significance level. In addition, ISVM performs better than Logit, SVM and PSVM at the 5% statistical significance level.

• Journal of Korea Port Economic Association
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• v.36 no.4
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• pp.17-30
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• 2020

In the shipping industry, it is essential to engage in the preemptive prediction of freight rate volatility through market monitoring. Considering that freight rates have already started to fall, the loss of shipping companies will soon be uncontrollable. Therefore, in this study, factors affecting the freight rates of bulk carriers, which have relatively large freight rate volatility as compared to container freight rates, were quantified and analyzed. In doing so, we intended to contribute to future shipping market monitoring. We performed an analysis using a vector error correction model and estimated the influence of six independent variables on the charter rates of bulk carriers by Handy Size, Supramax, Panamax, and Cape Size. The six independent variables included the bulk carrier fleet volume, iron ore traffic volume, ribo interest rate, bunker oil price, and Euro-Dollar exchange rate. The dependent variables were handy size (32,000 DWT) spot charter rates, Supramax 6 T/C average charter rates, Pana Max (75,000 DWT) spot charter, and Cape Size (170,000 DWT) spot charter. The study examined charter rates by size of bulk carriers, which was different from studies on existing specific types of ships or fares in oil tankers and chemical carriers other than bulk carriers. Findings revealed that influencing factors differed for each ship size. The Libo interest rate had a significant effect on all four ship types, and the iron ore traffic volume had a significant effect on three ship types. The Ribo rate showed a negative (-) relationship with Handy Size, Supramax, Panamax, and Cape Size. Iron ore traffic influenced three types of linearity, except for Panamax. The size of shipping companies differed depending on their characteristics. These findings are expected to contribute to the establishment of a management strategy for shipping companies by analyzing the factors influencing changes in the freight rates of charterers, which have a profound effect on the management performance of shipping companies.

• Journal of the Korean Association of Geographic Information Studies
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• v.24 no.4
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• pp.99-112
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• 2021

This study was performed to predict spatial change of future forestland area in South Korea at regional level for supporting forest-related plans established by local governments. In the study, land use was classified to three types which are forestland, agricultural land, and urban and other lands. A logistic regression model was developed using transitional interaction between each land use type and topographical factors, land use restriction factors, socioeconomic indices, and development infrastructures. In this model, change probability from a target land use type to other land use types was estimated using raster dataset(30m×30m) for each variable. With priority order map based on the probability of land use change, the total annual amount of land use change was allocated to the cells in the order of the highest transition potential for the spatial analysis. In results, it was found that slope degree and slope standard value by the local government were the main factors affecting the probability of change from forestland to urban and other land. Also, forestland was more likely to change to urban and other land in the conditions of a more gentle slope, lower slope criterion allowed to developed, and higher land price and population density. Consequently, it was predicted that forestland area would decrease by 2027 due to the change from forestland to urban and others, especially in metropolitan and major cities, and that forestland area would increase between 2028 and 2050 in the most local provincial cities except Seoul, Gyeonggi-do, and Jeju Island due to locality extinction with decline in population. Thus, local government is required to set an adequate forestland use criterion for balanced development, reasonable use and conservation, and to establish the regional forest strategies and policies considering the future land use change trends.

• Journal of Intelligence and Information Systems
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• v.26 no.1
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• pp.135-149
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• 2020

Artificial intelligences are changing world. Financial market is also not an exception. Robo-Advisor is actively being developed, making up the weakness of traditional asset allocation methods and replacing the parts that are difficult for the traditional methods. It makes automated investment decisions with artificial intelligence algorithms and is used with various asset allocation models such as mean-variance model, Black-Litterman model and risk parity model. Risk parity model is a typical risk-based asset allocation model which is focused on the volatility of assets. It avoids investment risk structurally. So it has stability in the management of large size fund and it has been widely used in financial field. XGBoost model is a parallel tree-boosting method. It is an optimized gradient boosting model designed to be highly efficient and flexible. It not only makes billions of examples in limited memory environments but is also very fast to learn compared to traditional boosting methods. It is frequently used in various fields of data analysis and has a lot of advantages. So in this study, we propose a new asset allocation model that combines risk parity model and XGBoost machine learning model. This model uses XGBoost to predict the risk of assets and applies the predictive risk to the process of covariance estimation. There are estimated errors between the estimation period and the actual investment period because the optimized asset allocation model estimates the proportion of investments based on historical data. these estimated errors adversely affect the optimized portfolio performance. This study aims to improve the stability and portfolio performance of the model by predicting the volatility of the next investment period and reducing estimated errors of optimized asset allocation model. As a result, it narrows the gap between theory and practice and proposes a more advanced asset allocation model. In this study, we used the Korean stock market price data for a total of 17 years from 2003 to 2019 for the empirical test of the suggested model. The data sets are specifically composed of energy, finance, IT, industrial, material, telecommunication, utility, consumer, health care and staple sectors. We accumulated the value of prediction using moving-window method by 1,000 in-sample and 20 out-of-sample, so we produced a total of 154 rebalancing back-testing results. We analyzed portfolio performance in terms of cumulative rate of return and got a lot of sample data because of long period results. Comparing with traditional risk parity model, this experiment recorded improvements in both cumulative yield and reduction of estimated errors. The total cumulative return is 45.748%, about 5% higher than that of risk parity model and also the estimated errors are reduced in 9 out of 10 industry sectors. The reduction of estimated errors increases stability of the model and makes it easy to apply in practical investment. The results of the experiment showed improvement of portfolio performance by reducing the estimated errors of the optimized asset allocation model. Many financial models and asset allocation models are limited in practical investment because of the most fundamental question of whether the past characteristics of assets will continue into the future in the changing financial market. However, this study not only takes advantage of traditional asset allocation models, but also supplements the limitations of traditional methods and increases stability by predicting the risks of assets with the latest algorithm. There are various studies on parametric estimation methods to reduce the estimated errors in the portfolio optimization. We also suggested a new method to reduce estimated errors in optimized asset allocation model using machine learning. So this study is meaningful in that it proposes an advanced artificial intelligence asset allocation model for the fast-developing financial markets.

• Journal of Internet Computing and Services
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• v.14 no.5
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• pp.1-10
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• 2013

RFID(Radio Frequency Identification) system is non-contact identification technology. A basic RFID system consists of a reader, and a set of tags. RFID tags can be divided into active and passive tags. Active tags with power source allows their own operation execution and passive tags are small and low-cost. So passive tags are more suitable for distribution industry than active tags. A reader processes the information receiving from tags. RFID system achieves a fast identification of multiple tags using radio frequency. RFID systems has been applied into a variety of fields such as distribution, logistics, transportation, inventory management, access control, finance and etc. To encourage the introduction of RFID systems, several problems (price, size, power consumption, security) should be resolved. In this paper, we proposed an algorithm to significantly alleviate the collision problem caused by simultaneous responses of multiple tags. In the RFID systems, in anti-collision schemes, there are three methods: probabilistic, deterministic, and hybrid. In this paper, we introduce ALOHA-based protocol as a probabilistic method, and Tree-based protocol as a deterministic one. In Aloha-based protocols, time is divided into multiple slots. Tags randomly select their own IDs and transmit it. But Aloha-based protocol cannot guarantee that all tags are identified because they are probabilistic methods. In contrast, Tree-based protocols guarantee that a reader identifies all tags within the transmission range of the reader. In Tree-based protocols, a reader sends a query, and tags respond it with their own IDs. When a reader sends a query and two or more tags respond, a collision occurs. Then the reader makes and sends a new query. Frequent collisions make the identification performance degrade. Therefore, to identify tags quickly, it is necessary to reduce collisions efficiently. Each RFID tag has an ID of 96bit EPC(Electronic Product Code). The tags in a company or manufacturer have similar tag IDs with the same prefix. Unnecessary collisions occur while identifying multiple tags using Query Tree protocol. It results in growth of query-responses and idle time, which the identification time significantly increases. To solve this problem, Collision Tree protocol and M-ary Query Tree protocol have been proposed. However, in Collision Tree protocol and Query Tree protocol, only one bit is identified during one query-response. And, when similar tag IDs exist, M-ary Query Tree Protocol generates unnecessary query-responses. In this paper, we propose Adaptive M-ary Query Tree protocol that improves the identification performance using m-bit recognition, collision information of tag IDs, and prediction technique. We compare our proposed scheme with other Tree-based protocols under the same conditions. We show that our proposed scheme outperforms others in terms of identification time and identification efficiency.