Book Image

Machine Learning for Finance

By : Jannes Klaas
Book Image

Machine Learning for Finance

By: Jannes Klaas

Overview of this book

Machine Learning for Finance explores new advances in machine learning and shows how they can be applied across the financial sector, including insurance, transactions, and lending. This book explains the concepts and algorithms behind the main machine learning techniques and provides example Python code for implementing the models yourself. The book is based on Jannes Klaas’ experience of running machine learning training courses for financial professionals. Rather than providing ready-made financial algorithms, the book focuses on advanced machine learning concepts and ideas that can be applied in a wide variety of ways. The book systematically explains how machine learning works on structured data, text, images, and time series. You'll cover generative adversarial learning, reinforcement learning, debugging, and launching machine learning products. Later chapters will discuss how to fight bias in machine learning. The book ends with an exploration of Bayesian inference and probabilistic programming.
Table of Contents (15 chapters)
Machine Learning for Finance
Contributors
Preface
Other Books You May Enjoy
Index

Bag-of-words


A simple yet effective way of classifying text is to see the text as a bag-of-words. This means that we do not care for the order in which words appear in the text, instead we only care about which words appear in the text.

One of the ways of doing a bag-of-words classification is by simply counting the occurrences of different words from within a text. This is done with a so-called count vector. Each word has an index, and for each text, the value of the count vector at that index is the number of occurrences of the word that belong to the index.

Picture this as an example: the count vector for the text "I see cats and dogs and elephants" could look like this:

i

see

cats

and

dogs

elephants

1

1

1

2

1

1

In reality, count vectors are pretty sparse. There are about 23,000 different words in our text corpus, so it makes sense to limit the number of words we want to include in our count vectors. This could mean excluding words that are often just gibberish or typos with...