financial forecastings using neural networks ppt
DESCRIPTION
The aim of the project is to predict the interest rates,bond yield variation and stock market prices using neural networks and make a comparative study of different pre-processing techniques viz Fast Fourier Transform and Hilbert Huang Transform.this ppt needs other two also..TRANSCRIPT
![Page 1: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/1.jpg)
PRESENTED BY ,
AMIT JAIN 07000519RANJEET RANJAN 07000537PUNEET GUPTA 07000534
FINANCIAL FORECASTING USING NEURAL
NETWORKS
![Page 2: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/2.jpg)
What is Financial Forecasting
Prediction of prices of instruments of speculationStocksCommodity futuresExchange RatesInterest Rates .
Problem : Non linear and non stationary data
![Page 3: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/3.jpg)
Methods Used
Fundamental AnalysisUnderstanding the supply demand curveInvolves studying of news and economic
factors Technical Analysis
Understanding historical price patternsTools like moving average, learning systems
Latest Approach: Combine Technical and Fundamental Analysis
![Page 4: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/4.jpg)
NEURAL NETWORKS
Map some type of input stream of information to an output stream of data.
They derive non-linear models that can be trained to map past and future values of the input output relationship .It extracts relationships governing the data that was not obvious using other analytical tools.
Capability to recognize pattern and the speed of techniques to accurately solve complex processes, exploited exhaustively in financial forecasting.
Trained without the restriction of a model to derive parameters and discover relationships, driven and shaped solely by the nature of the data.
![Page 5: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/5.jpg)
NEURAL NETWORKS V/S CONVENTIONAL COMPUTERS
Neural networks have the unique capability of learning thus are adaptive .This problem solving tool creates a unique likeness to the human brain .
Use the interconnectedness of the elements of the model rather than follow a set of sequential steps, that may or may not solve the problem like computers do.
A different aspect of model building, where the unique relationships between the variables creates the model, rather than trying to force variables to conform to a theoretical abstract that may or may not exist.
![Page 6: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/6.jpg)
NEURAL NETWORKS IN FINANCE
Neural networks are trained without the restriction of a model to derive parameters and discover relationships, driven and shaped solely by the nature of the data. Thus it has profound implications and applicability to the finance field.
Some of the fields where it is applied are:
Financial forecasting
Capital budgeting and risk management
Stock market analysis Used to analyze and verify Economic hypothesis and theories
which were not possible otherwise. Govt. predicts interest rates to gauge the future inflationary situation
of its economy .
![Page 7: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/7.jpg)
Neural Networking and Similarities with the Workings of the Human Brain
![Page 8: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/8.jpg)
A SIMPLE NEURON
![Page 9: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/9.jpg)
VECTOR INPUT TO NEURON
![Page 10: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/10.jpg)
LAYER OF NEURONS
![Page 11: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/11.jpg)
LAYER OF NEURONS …..
![Page 12: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/12.jpg)
MULTIPLE LAYERS
![Page 13: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/13.jpg)
MULTIPLE LAYERS …..
![Page 14: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/14.jpg)
NARX MODEL
![Page 15: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/15.jpg)
TRANSFER FUNCTIONS
![Page 16: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/16.jpg)
TRAINING ALGORITHMS
trainlm : fastest and better for non-linear cases , default for feed-forwardnet .
![Page 17: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/17.jpg)
BACK-PROPOGATION
Numerous such input/target pairs are used to train the Neural Network.
![Page 18: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/18.jpg)
TIME SERIES FORECASTING
Time series forecasting or time series prediction, takes an existing series of data and forecasts the data values. The goal is to observe or model the existing data series to enable future unknown data values to be forecasted accurately.
Done using the NARX model or NAR model .
![Page 19: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/19.jpg)
DIFFICULTIES
Limited quantity of data . Noise in data – It obscures the
underlying pattern of the data . Non-stationarity - data that do not have
the same statistical properties (e.g., mean and variance) at each point in time
Appropriate Forecasting Technique Selection .
![Page 20: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/20.jpg)
Preprocessing of Training Data
Reason: Need to understand underlying patterns.
Tools:Moving AverageFast Fourier Transform (FFT)Hilbert Huang Transform (HHT)
![Page 21: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/21.jpg)
Types Of Data Worked Upon
Interest Rates (RBI 91 day Govt. Of India Treasury Bills)
Sensex Data ( 2005-2010)
Exchange Rates (Daily Exchange Rates of INR-Dollars 2004-2011)
All the Data are divided into Three Sets1. Training Set
2. Testing Set
3. Validation Set
![Page 22: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/22.jpg)
Types Of Preprocessing
No Pre-Processing (Simple NN) Using FFT (FFT NN) Using HHT (HHT NN)
All the types of data are used on all the types of preprocessing techniques , therefore generating 9 cases.
Now, we Compare all of them Data-Wise.
![Page 23: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/23.jpg)
1. Interest Rates The interest rate data is applied on all three kinds of preprocessing.
The Error Graphs are as: Simple NN
![Page 24: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/24.jpg)
FFT NN
![Page 25: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/25.jpg)
HHT NN
![Page 26: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/26.jpg)
2. Sensex Data The sensex data is applied on all three kinds of
preprocessing. The Error Graphs are as: Simple NN
![Page 27: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/27.jpg)
FFT NN
![Page 28: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/28.jpg)
HHT NN
![Page 29: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/29.jpg)
3. Exchange Rates The Exchange Rate data is applied on all three kinds of
preprocessing. The Error Graphs are as:
Simple NN
![Page 30: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/30.jpg)
FFT NN
![Page 31: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/31.jpg)
HHT NN
![Page 32: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/32.jpg)
Conclusion from Results
Pre-processing can boost the Neural Network Performance
The performance of Neural Network also depends on the nature of the data series
![Page 33: Financial forecastings using neural networks ppt](https://reader033.vdocuments.mx/reader033/viewer/2022061121/546e74c1af79597b298b5713/html5/thumbnails/33.jpg)
Thank You