• Journal of Intelligence and Information Systems
• /
• v.22 no.4
• /
• pp.177-192
• /
• 2016

Machine learning is a field of artificial intelligence. It refers to an area of computer science related to providing machines the ability to perform their own data analysis, decision making and forecasting. For example, one of the representative machine learning models is artificial neural network, which is a statistical learning algorithm inspired by the neural network structure of biology. In addition, there are other machine learning models such as decision tree model, naive bayes model and SVM(support vector machine) model. Among the machine learning models, we use SVM model in this study because it is mainly used for classification and regression analysis that fits well to our study. The core principle of SVM is to find a reasonable hyperplane that distinguishes different group in the data space. Given information about the data in any two groups, the SVM model judges to which group the new data belongs based on the hyperplane obtained from the given data set. Thus, the more the amount of meaningful data, the better the machine learning ability. In recent years, many financial experts have focused on machine learning, seeing the possibility of combining with machine learning and the financial field where vast amounts of financial data exist. Machine learning techniques have been proved to be powerful in describing the non-stationary and chaotic stock price dynamics. A lot of researches have been successfully conducted on forecasting of stock prices using machine learning algorithms. Recently, financial companies have begun to provide Robo-Advisor service, a compound word of Robot and Advisor, which can perform various financial tasks through advanced algorithms using rapidly changing huge amount of data. Robo-Adviser's main task is to advise the investors about the investor's personal investment propensity and to provide the service to manage the portfolio automatically. In this study, we propose a method of forecasting the Korean volatility index, VKOSPI, using the SVM model, which is one of the machine learning methods, and applying it to real option trading to increase the trading performance. VKOSPI is a measure of the future volatility of the KOSPI 200 index based on KOSPI 200 index option prices. VKOSPI is similar to the VIX index, which is based on S&P 500 option price in the United States. The Korea Exchange(KRX) calculates and announce the real-time VKOSPI index. VKOSPI is the same as the usual volatility and affects the option prices. The direction of VKOSPI and option prices show positive relation regardless of the option type (call and put options with various striking prices). If the volatility increases, all of the call and put option premium increases because the probability of the option's exercise possibility increases. The investor can know the rising value of the option price with respect to the volatility rising value in real time through Vega, a Black-Scholes's measurement index of an option's sensitivity to changes in the volatility. Therefore, accurate forecasting of VKOSPI movements is one of the important factors that can generate profit in option trading. In this study, we verified through real option data that the accurate forecast of VKOSPI is able to make a big profit in real option trading. To the best of our knowledge, there have been no studies on the idea of predicting the direction of VKOSPI based on machine learning and introducing the idea of applying it to actual option trading. In this study predicted daily VKOSPI changes through SVM model and then made intraday option strangle position, which gives profit as option prices reduce, only when VKOSPI is expected to decline during daytime. We analyzed the results and tested whether it is applicable to real option trading based on SVM's prediction. The results showed the prediction accuracy of VKOSPI was 57.83% on average, and the number of position entry times was 43.2 times, which is less than half of the benchmark (100 times). A small number of trading is an indicator of trading efficiency. In addition, the experiment proved that the trading performance was significantly higher than the benchmark.

• Journal of Intelligence and Information Systems
• /
• v.18 no.1
• /
• pp.125-141
• /
• 2012

These days, the malicious attacks and hacks on the networked systems are dramatically increasing, and the patterns of them are changing rapidly. Consequently, it becomes more important to appropriately handle these malicious attacks and hacks, and there exist sufficient interests and demand in effective network security systems just like intrusion detection systems. Intrusion detection systems are the network security systems for detecting, identifying and responding to unauthorized or abnormal activities appropriately. Conventional intrusion detection systems have generally been designed using the experts' implicit knowledge on the network intrusions or the hackers' abnormal behaviors. However, they cannot handle new or unknown patterns of the network attacks, although they perform very well under the normal situation. As a result, recent studies on intrusion detection systems use artificial intelligence techniques, which can proactively respond to the unknown threats. For a long time, researchers have adopted and tested various kinds of artificial intelligence techniques such as artificial neural networks, decision trees, and support vector machines to detect intrusions on the network. However, most of them have just applied these techniques singularly, even though combining the techniques may lead to better detection. With this reason, we propose a new integrated model for intrusion detection. Our model is designed to combine prediction results of four different binary classification models-logistic regression (LOGIT), decision trees (DT), artificial neural networks (ANN), and support vector machines (SVM), which may be complementary to each other. As a tool for finding optimal combining weights, genetic algorithms (GA) are used. Our proposed model is designed to be built in two steps. At the first step, the optimal integration model whose prediction error (i.e. erroneous classification rate) is the least is generated. After that, in the second step, it explores the optimal classification threshold for determining intrusions, which minimizes the total misclassification cost. To calculate the total misclassification cost of intrusion detection system, we need to understand its asymmetric error cost scheme. Generally, there are two common forms of errors in intrusion detection. The first error type is the False-Positive Error (FPE). In the case of FPE, the wrong judgment on it may result in the unnecessary fixation. The second error type is the False-Negative Error (FNE) that mainly misjudges the malware of the program as normal. Compared to FPE, FNE is more fatal. Thus, total misclassification cost is more affected by FNE rather than FPE. To validate the practical applicability of our model, we applied it to the real-world dataset for network intrusion detection. The experimental dataset was collected from the IDS sensor of an official institution in Korea from January to June 2010. We collected 15,000 log data in total, and selected 10,000 samples from them by using random sampling method. Also, we compared the results from our model with the results from single techniques to confirm the superiority of the proposed model. LOGIT and DT was experimented using PASW Statistics v18.0, and ANN was experimented using Neuroshell R4.0. For SVM, LIBSVM v2.90-a freeware for training SVM classifier-was used. Empirical results showed that our proposed model based on GA outperformed all the other comparative models in detecting network intrusions from the accuracy perspective. They also showed that the proposed model outperformed all the other comparative models in the total misclassification cost perspective. Consequently, it is expected that our study may contribute to build cost-effective intelligent intrusion detection systems.

• Journal of Korean Tunnelling and Underground Space Association
• /
• v.23 no.6
• /
• pp.469-484
• /
• 2021

Rock mass classification results have a great influence on construction schedule and budget as well as tunnel stability in tunnel design. A total of 3,526 tunnels have been constructed in Korea and the associated techniques in tunnel design and construction have been continuously developed, however, not many studies have been performed on how to assess rock mass quality and grade more accurately. Thus, numerous cases show big differences in the results according to inspectors' experience and judgement. Hence, this study aims to suggest a more reliable rock mass classification (RMR) model using machine learning algorithms, which is surging in availability, through the analyses based on various rock and rock mass information collected from boring investigations. For this, 11 learning parameters (depth, rock type, RQD, electrical resistivity, UCS, V_p, V_s, Young's modulus, unit weight, Poisson's ratio, RMR) from 13 local tunnel cases were selected, 337 learning data sets as well as 60 test data sets were prepared, and 6 machine learning algorithms (DT, SVM, ANN, PCA & ANN, RF, XGBoost) were tested for various hyperparameters for each algorithm. The results show that the mean absolute errors in RMR value from five algorithms except Decision Tree were less than 8 and a Support Vector Machine model is the best model. The applicability of the model, established through this study, was confirmed and this prediction model can be applied for more reliable rock mass classification when additional various data is continuously cumulated.

• Journal of Korean Society of Forest Science
• /
• v.112 no.4
• /
• pp.426-441
• /
• 2023

This study investigated the predictive accuracy of a model of landslide displacement in Jecheon-si, where a great number of landslides were triggered by heavy rain on both natural (non-clear-cut) and clear-cut slopes during August 2020. This was accomplished by applying three flow direction methods (single flow direction, SFD; multiple flow direction, MFD; infinite flow direction, IFD) and the degree of root cohesion to an infinite slope stability equation. The application assumed that the soil saturation and any changes in root cohesion occurred following the timber harvest (clear-cutting). In the study area, 830 landslide locations were identified via landslide inventory mapping from satellite images and 25 cm resolution aerial photographs. The results of the landslide modeling comparison showed the accuracy of the models that considered changes in the root cohesion following clear-cutting to be improved by 1.3% to 2.6% when compared with those not considered in the area under the receiver operating characteristics (AUROC) analysis. Furthermore, the accuracy of the models that used the MFD algorithm improved by up to 1.3% when compared with the models that used the other algorithms in the AUROC analysis. These results suggest that the discriminatory application of the root cohesion, which considers changes in the vegetation condition, and the selection of the flow direction method may influence the accuracy of landslide predictive modeling. In the future, the results of this study should be verified by examining the root cohesion and its dynamic changes according to the tree species using the field hydrological monitoring technique.

• Journal of Intelligence and Information Systems
• /
• v.26 no.1
• /
• pp.135-149
• /
• 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 Intelligence and Information Systems
• /
• v.16 no.3
• /
• pp.77-97
• /
• 2010

Market timing is an investment strategy which is used for obtaining excessive return from financial market. In general, detection of market timing means determining when to buy and sell to get excess return from trading. In many market timing systems, trading rules have been used as an engine to generate signals for trade. On the other hand, some researchers proposed the rough set analysis as a proper tool for market timing because it does not generate a signal for trade when the pattern of the market is uncertain by using the control function. The data for the rough set analysis should be discretized of numeric value because the rough set only accepts categorical data for analysis. Discretization searches for proper "cuts" for numeric data that determine intervals. All values that lie within each interval are transformed into same value. In general, there are four methods for data discretization in rough set analysis including equal frequency scaling, expert's knowledge-based discretization, minimum entropy scaling, and na$\ddot{i}$ve and Boolean reasoning-based discretization. Equal frequency scaling fixes a number of intervals and examines the histogram of each variable, then determines cuts so that approximately the same number of samples fall into each of the intervals. Expert's knowledge-based discretization determines cuts according to knowledge of domain experts through literature review or interview with experts. Minimum entropy scaling implements the algorithm based on recursively partitioning the value set of each variable so that a local measure of entropy is optimized. Na$\ddot{i}$ve and Booleanreasoning-based discretization searches categorical values by using Na$\ddot{i}$ve scaling the data, then finds the optimized dicretization thresholds through Boolean reasoning. Although the rough set analysis is promising for market timing, there is little research on the impact of the various data discretization methods on performance from trading using the rough set analysis. In this study, we compare stock market timing models using rough set analysis with various data discretization methods. The research data used in this study are the KOSPI 200 from May 1996 to October 1998. KOSPI 200 is the underlying index of the KOSPI 200 futures which is the first derivative instrument in the Korean stock market. The KOSPI 200 is a market value weighted index which consists of 200 stocks selected by criteria on liquidity and their status in corresponding industry including manufacturing, construction, communication, electricity and gas, distribution and services, and financing. The total number of samples is 660 trading days. In addition, this study uses popular technical indicators as independent variables. The experimental results show that the most profitable method for the training sample is the na$\ddot{i}$ve and Boolean reasoning but the expert's knowledge-based discretization is the most profitable method for the validation sample. In addition, the expert's knowledge-based discretization produced robust performance for both of training and validation sample. We also compared rough set analysis and decision tree. This study experimented C4.5 for the comparison purpose. The results show that rough set analysis with expert's knowledge-based discretization produced more profitable rules than C4.5.