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

More bells and whistles for our neural network


Let's take a minute to look at some of the other elements of our neural network.

Momentum

In previous chapters we've explained gradient descent in terms of someone trying to find the way down a mountain by just following the slope of the floor. Momentum can be explained with an analogy to physics, where a ball is rolling down the same hill. A small bump in the hill would not make the ball roll in a completely different direction. The ball already has some momentum, meaning that its movement gets influenced by its previous movement.

Instead of directly updating the model parameters with their gradient, we update them with the exponentially weighted moving average. We update our parameter with an outlier gradient, then we take the moving average, which will smoothen out outliers and capture the general direction of the gradient, as we can see in the following diagram:

How momentum smoothens gradient updates

The exponentially weighted moving average...