Articlegold2019

Research on Quantitative Investment Strategies Based on Deep Learning

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Stock Market Forecasting Methods Financial Markets and Investment Strategies Stochastic processes and financial applications

Abstract

This paper takes 50 ETF options in the options market with high transaction complexity as the research goal. The Random Forest (RF) model, the Long Short-Term Memory network (LSTM) model, and the Support Vector Regression (SVR) model are used to predict 50 ETF price. Firstly, the original quantitative investment strategy is taken as the research object, and the 15 min trading frequency, which is more in line with the actual trading situation, is used, and then the Delta hedging concept of the options is introduced to control the risk of the quantitative investment strategy, to achieve the 15 min hedging strategy. Secondly, the final transaction price, buy price, highest price, lowest price, volume, historical volatility, and the implied volatility of the time segment marked with 50 ETF are the seven key factors affecting the price of 50 ETF. Then, two different types of LSTM-SVR models, LSTM-SVR I and LSTM-SVR II, are used to predict the final transaction price of the 50 ETF in the next time segment. In LSTM-SVR I model, the output of LSTM and seven key factors are combined as the input of SVR model. In LSTM-SVR II model, the hidden state vectors of LSTM and seven key factors are combined as the inputs of the SVR model. The results of the two LSTM-SVR models are compared with each other, and the better one is applied to the trading strategy. Finally, the benefit of the deep learning-based quantitative investment strategy, the resilience, and the maximum drawdown are used as indicators to judge the pros and cons of the research results. The accuracy and deviations of the LSTM-SVR prediction models are compared with those of the LSTM model and those of the RF model. The experimental results show that the quantitative investment strategy based on deep learning has higher returns than the traditional quantitative investment strategy, the yield curve is more stable, and the anti-fall performance is better.

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References

1973The Pricing of Options and Corporate Liabilities 2003Financial time series forecasting using support vector machines 2003Support vector machine with adaptive parameters in financial time series forecasting 2015A LSTM-based method for stock returns prediction: A case study of China stock market 2001Financial time series prediction using least squares support vector machines within the evidence framework 2018Deep learning-based feature engineering for stock price movement prediction 2017Forecasting Stock Prices from the Limit Order Book Using Convolutional Neural Networks 2002Modified support vector machines in financial time series forecasting

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