A Primer on Deep Reinforcement Learning for Finance

31 Pages Posted: 3 Jan 2023 Last revised: 13 Jan 2023

See all articles by Joerg Osterrieder

Joerg Osterrieder

University of Twente; Bern Business School

Chat GPT

affiliation not provided to SSRN

Date Written: January 2, 2023

Abstract

Deep reinforcement learning (DRL) is a powerful and emerging technique for solving complex decision-making problems by learning from experience and interaction with an environment. In the field of finance, DRL has the potential to revolutionize the way we optimize portfolios, manage risk, and execute trades, by leveraging the vast amounts of data available and the ability of neural networks to learn and adapt. However, applying DRL to finance problems also poses several challenges, such as dealing with high-dimensional state spaces, long-term dependencies, and limited data. In this paper, we review the key concepts and algorithms of DRL, and we describe the opportunities and challenges of applying DRL to finance problems, such as portfolio optimization, risk management, and algorithmic trading. We also present several case studies and examples of how DRL has been applied to finance problems, and we discuss the evaluation and potential future directions of DRL in finance. Our aim is to provide a comprehensive overview of DRL in finance and to highlight the potential and limitations of this promising field of research and application.

Keywords: Deep reinforcement learning, finance, portfolio optimization, risk management, algorithmic trading

JEL Classification: G40

Suggested Citation

Osterrieder, Joerg and GPT, Chat, A Primer on Deep Reinforcement Learning for Finance (January 2, 2023). Available at SSRN: https://ssrn.com/abstract=4316650 or http://dx.doi.org/10.2139/ssrn.4316650

Joerg Osterrieder (Contact Author)

University of Twente ( email )

Drienerlolaan 5
Departement of High-Tech Business and Entrepreneur
Enschede, 7522 NB
Netherlands

Bern Business School ( email )

Brückengasse
Institute of Applied Data Sciences and Finance
Bern, BE 3005
Switzerland

Chat GPT

affiliation not provided to SSRN

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