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A new investment method with AutoEncoder: Applications to crypto currencies(Forthcoming in "Expert Systems with Applications")

Author

Listed:
  • Masafumi Nakano

    (GCI Asset Management)

  • Akihiko Takahashi

    (Graduate School of Economics and CARF, University of Tokyo)

Abstract

This paper proposes a novel approach to the portfolio management using an AutoEncoder. In particular, features learned by an AutoEncoder with ReLU are directly exploited to portfolio constructions. Since the AutoEncoder extracts characteristics of data through a non-linear activation function ReLU, its realization is generally difficult due to the non-linear transformation procedure. In the current paper, we solve this problem by taking full advantage of the similarity of ReLU and an option payoff. Especially, this paper shows that the features are successfully replicated by applying so-called dynamic delta hedging strategy. An out of sample simulation with crypto currency dataset shows the effectiveness of our proposed strategy.

Suggested Citation

  • Masafumi Nakano & Akihiko Takahashi, 2020. "A new investment method with AutoEncoder: Applications to crypto currencies(Forthcoming in "Expert Systems with Applications")," CARF F-Series CARF-F-489, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf489
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    Cited by:

    1. Daiya Mita & Akihiko Takahashi, 2022. "Multi-Agent Model Based Proactive Risk Management For Equity Investment," CIRJE F-Series CIRJE-F-1207, CIRJE, Faculty of Economics, University of Tokyo.
    2. Akihiko Takahashi & Soichiro Takahashi, 2022. "A State Space Modeling for Proactive Management in Equity Investment," CIRJE F-Series CIRJE-F-1197, CIRJE, Faculty of Economics, University of Tokyo.
    3. Akihiko Takahashi & Soichiro Takahashi, 2022. "A state space modeling for proactive management in equity investment "Forthcoming in International Journal of Financial Engineering"," CARF F-Series CARF-F-543, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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