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Unformatted text preview: ecurrent network such as an Elman net can be applied so that the effect of the
interest rates on the stock index prior to the data used can also be accounted for.
Thus, a history or integral effect can be obtained using a recurrent network.
• Even if a recurrent network is used, some delay will have to be assumed for using the
interest rates. The easiest case would be to use current interest rates without any delay 16 • and allow the training to establish the actual delay. There is a lot of scope for work
with regard to the choice of the delay in the interest rates.
For using this technique in practice, a trading mechanism based on the predictions of
the network needs to be established which will give buy/sell signals and will maximize
profit without increasing the number of trades by a large number. 6. References
 Black, F. and Scholes, M., “The pricing of Options and Corporate Liabilities,” Journal of
Political Economy, vol. 81, no. 3, May-June 1973.
 Azoff, E. M., Neural network time series forecasting of financial markets, Wiley, New York,
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This note was uploaded on 07/20/2012 for the course ECON 203 taught by Professor Girishdev during the Spring '12 term at Indian Institute of Technology, Kharagpur.
- Spring '12