Improving the Robustness of Trading Strategy Backtesting with Boltzmann Machines and Generative Adversarial Networks

72 Pages Posted: 5 Aug 2020

See all articles by Edmond Lezmi

Edmond Lezmi

Amundi Asset Management

Jules Roche

affiliation not provided to SSRN

Thierry Roncalli

Amundi Asset Management; University of Evry

Jiali Xu

Amundi Asset Management

Date Written: July 7, 2020

Abstract

This article explores the use of machine learning models to build a market generator. The underlying idea is to simulate artificial multi-dimensional financial time series, whose statistical properties are the same as those observed in the financial markets. In particular, these synthetic data must preserve the probability distribution of asset returns, the stochastic dependence between the different assets and the autocorrelation across time. The article proposes then a new approach for estimating the probability distribution of backtest statistics. The final objective is to develop a framework for improving the risk management of quantitative investment strategies, in particular in the space of smart beta, factor investing and alternative risk premia.

Keywords: Machine learning, generative approach, discriminative approach, restricted Boltzmann machine, generative adversarial network, Wasserstein distance, market generator, quantitative asset management, backtesting, trading strategy

JEL Classification: C53, G11

Suggested Citation

Lezmi, Edmond and Roche, Jules and Roncalli, Thierry and Xu, Jiali, Improving the Robustness of Trading Strategy Backtesting with Boltzmann Machines and Generative Adversarial Networks (July 7, 2020). Available at SSRN: https://ssrn.com/abstract=3645473 or http://dx.doi.org/10.2139/ssrn.3645473

Edmond Lezmi

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

Jules Roche

affiliation not provided to SSRN

Thierry Roncalli (Contact Author)

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

University of Evry ( email )

Boulevard Francois Mitterrand
F-91025 Evry Cedex
France

Jiali Xu

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

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