Applications of computational intelligence in data-driven trading

302 Pages·2020·3.484 MB·English

by  Doloc, Cris

“Doloc’sbookisamasterfullywrittenandessentialhandbookforanyoneinvolved
in utilizing data to gain insights into their respective industries. With intellectual
honesty, Doloc separates hype from reality, skillfully and intricately weaving a
framework to harness the advances and recent developments in quantitative and
computationalfinance.Hechallengesreaderstoadoptthebestapproachesfortheir
applications, knowing the potential but also the limitations, and wisely problem
solve.Theauthormayhaveexpertlydesignedthisbookforthetradingcommunity,
butthetakeawaysareindustryagnostic.Amust-readforanyacademicorpractitioner
indatascience,machinelearning,andAIfields.”
—RobFriesen,president&COO,BrightTrading,
LLC;CEO&DirectorofEducation,StockOdds,Inc.
“Cris Doloc’s book is a great introduction to a fascinating field of Computational
Intelligenceanditsapplicationstoquantitativefinance.Throughexamplesandcase
studiescoveringawiderangeofproblemsarisinginquantitativefinancefrommarket
making to derivative valuation and portfolio management the author demonstrates
howtoapplycomplextheoreticalframeworkstosolvingpracticalproblems.Usinga
sequenceofcasestudies,Dolocshowsquantitativeresearchersandpractitionersthe
powerofemergingComputationalIntelligenceandmachinelearningtechnologiesto
buildintelligentsolutionsforquantitativefinance.”
—YuriBurlakov,Ph.D.,headofProprietaryResearch,
VolantTrading
“Cris Doloc has created a valuable guide to Computational Intelligence and the
application of these technologies to real-world problems. This book establishes a
firmfoundationtoupdatetheFinancialMathematicsprogramcurriculumandprac-
titioners in this domain by presenting a systematic, contemporary development of
data-intensivecomputationappliedtofinancialmarkettradingandinvesting.Usinga
sequenceofcasestudies,Dolocshowsquantitativeresearchersandpractitionersthe
power of emerging Computational Intelligence and machine learning technologies
tobuildintelligentsolutionsforquantitativefinance.”
—JeffBlaschak,Ph.D.,datascientistandco-founder,
SocialMediaAnalytics,Inc.
“CrisDolochaswrittenabookthatismorethanjustasolidintroductiontothecurrent
stateoftheartinAIforquants;itisasolidintroductioninhowtothinkaboutAIfor
quants. In a field that is changing daily, the focus on application of techniques and
critical thinking about the strengths and weaknesses of different approaches rather
thanondetailsofthelatesttoolsmakestimespentwiththisbookagoodinvestment
inthefuture.Thecasestudiesinparticularhelpgroundthematerialintherealworld
ofquantitativefinanceandprovidepowerfulexamplesoftheinformedapplicationof
AItofinance.”
—JohnAshley,Ph.D.,directorofGlobalProfessionalServices,
Nvidia
“Doloc’s book masterfully distills the complex world of quantitative trading into a
clear guide that’s an ideal starting point for new, would-be quants. It provides so
many fresh insights into the space that even more seasoned practitioners can learn
fromit.”
—JamesL.Koutoulas,Esq.,CEO,
TyphonCapitalManagement
“Through a series of case studies, Doloc illustrates a number of examples of
real-world problems designed to prepare the reader to work in the contemporary
world of quantitative finance. I recommend this book to students of financial
engineering and quantitative finance, and to all quantitatively oriented participants
inallareasoffinance.”
—IlyaTalman,president,
RoyTalman&Associates,Inc.
Applications of Computational Intelligence
in Data-Driven Trading

Applications of Computational
Intelligence in Data-Driven
Trading
CRISDOLOC
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Dedicatedtothememoryofmyfather,Emil

Contents
AbouttheAuthor xvii
Acknowledgments xix
AbouttheWebsite xxi
Introduction xxiii
Motivation xxiv
TargetAudience xxvi
BookStructure xxvii
1 TheEvolutionofTradingParadigms 1
1.1 Infrastructure-RelatedParadigmsinTrading 1
1.1.1 OpenOutcryTrading 2
1.1.2 AdvancesinCommunicationTechnology 2
1.1.3 TheDigitalRevolutionintheFinancialMarkets 3
1.1.4 TheHigh-FrequencyTradingParadigm 5
1.1.5 BlockchainandtheDecentralizationofMarkets 6
1.2 Decision-MakingParadigmsinTrading 7
1.2.1 DiscretionaryTrading 8
1.2.2 SystematicTrading 8
1.2.3 AlgorithmicTrading 9
1.3 TheNewParadigmofData-DrivenTrading 11
References 14
ix