Feb 21st, 2018
Machine Learning in Finance
This course is a dense presentation of machine learning (ML) tools used in financial risk management, portfolio management, and trading. Ten classes are offered: two on risk management, two on loan portfolio management, three on portfolio optimization, and three on high-frequency trading. The risk classes cover the risk measurement of financial assets using distribution fitting, copulas, PCA, and splines. The loan portfolio management classes cover risk estimation and backtesting using logistic regression, regularization, clustering methods, and the applied statistics concepts such as parameter and process risk. Kaggle competitions for loan portfolios which used tree-based algorithms for predictions are also reviewed. The classes on portfolio optimization introduce classic theories for asset return estimation and their extensions (multi-factor models) while using unsupervised & supervised ML methods to verify & derive new factors; modern portfolio theory using constrained optimization & robust methods; and Black-Litterman model portfolios where asset-specific, ML-derived models are integrated. The classes on trading introduce the limit order book and market microstructure and then move on to tour the winning strategies of to Kaggle competitions on trading. The feature engineering and code of the winning solutions are reviewed in depth.