Anthony Brabazon and Michael O Neill (Eds.) Natural Computing in Computational Finance: Volume 2

Transcription

1 Anthony Brabazon and Michael O Neill (Eds.) Natural Computing in Computational Finance: Volume 2

2 Studies in Computational Intelligence, Volume 185 Editor-in-Chief Prof. Janusz Kacprzyk Systems Research Institute Polish Academy of Sciences ul. Newelska Warsaw Poland kacprzyk@ibspan.waw.pl Further volumes of this series can be found on our homepage: springer.com Vol Pawel Delimata, Mikhail Ju. Moshkov, Andrzej Skowron and Zbigniew Suraj InhibitoryRulesinDataAnalysis,2009 ISBN Vol Nadia Nedjah, Luiza de Macedo Mourelle, JanuszKacprzyk,FelipeM.G.França and Alberto Ferreira de Souza (Eds.) Intelligent Text Categorization and Clustering, 2009 ISBN Vol Djamel A. Zighed, Shusaku Tsumoto, Zbigniew W. Ras and Hakim Hacid (Eds.) Mining Complex Data, 2009 ISBN Vol Constantinos Koutsojannis and Spiros Sirmakessis (Eds.) Tools and Applications with Artificial Intelligence, 2009 ISBN Vol Ngoc Thanh Nguyen and Lakhmi C. Jain (Eds.) Intelligent Agents in the Evolution of Web and Applications, 2009 ISBN Vol Andreas Tolk and Lakhmi C. Jain (Eds.) Complex Systems in Knowledge-based Environments: Theory, Models and Applications, 2009 ISBN Vol Nadia Nedjah, Luiza de Macedo Mourelle and Janusz Kacprzyk (Eds.) Innovative Applications in Data Mining, 2009 ISBN Vol Lakhmi C. Jain and Ngoc Thanh Nguyen (Eds.) Knowledge Processing and Decision Making in Agent-Based Systems, 2009 ISBN Vol Chi-Keong Goh,Yew-Soon Ong and Kay Chen Tan (Eds.) Multi-Objective Memetic Algorithms, 2009 ISBN Vol I-Hsien Ting and Hui-Ju Wu (Eds.) Web Mining Applications in E-Commerce and E-Services, 2009 ISBN Vol Tobias Grosche Computational Intelligence in Integrated Airline Scheduling, 2009 ISBN Vol. 174.Ajith Abraham, Rafael Falcón and Rafael Bello (Eds.) Rough Set Theory: A True Landmark in Data Analysis, 2009 ISBN Vol Godfrey C. Onwubolu and Donald Davendra (Eds.) Differential Evolution: A Handbook for Global Permutation-Based Combinatorial Optimization, 2009 ISBN Vol Beniamino Murgante, Giuseppe Borruso and Alessandra Lapucci (Eds.) Geocomputation and Urban Planning, 2009 ISBN Vol Dikai Liu, Lingfeng Wang and Kay Chen Tan (Eds.) Design and Control of Intelligent Robotic Systems, 2009 ISBN Vol Swagatam Das, Ajith Abraham and Amit Konar Metaheuristic Clustering, 2009 ISBN Vol Mircea Gh. Negoita and Sorin Hintea Bio-Inspired Technologies for the Hardware of Adaptive Systems, 2009 ISBN Vol Wojciech Mitkowski and Janusz Kacprzyk (Eds.) Modelling Dynamics in Processes and Systems, 2009 ISBN Vol Georgios Miaoulis and Dimitri Plemenos (Eds.) Intelligent Scene Modelling Information Systems, 2009 ISBN Vol Andrzej Bargiela and Witold Pedrycz (Eds.) Human-Centric Information Processing Through Granular Modelling, 2009 ISBN Vol Marco A.C. Pacheco and Marley M.B.R.Vellasco (Eds.) Intelligent Systems in Oil Field Development under Uncertainty, 2009 ISBN Vol Ljupco Kocarev, Zbigniew Galias and Shiguo Lian (Eds.) Intelligent Computing Based on Chaos ISBN Vol Anthony Brabazon and Michael O Neill (Eds.) Natural Computing in Computational Finance, 2009 ISBN

3 Anthony Brabazon Michael O Neill (Eds.) Natural Computing in Computational Finance Volume 2 123

4 Prof. Anthony Brabazon Head of Research, School of Business Director, Natural Computing Research and Applications Group, University College Dublin Belfield, Dublin 4 Ireland anthony.brabazon@ucd.ie Dr. Michael O Neill Director, Natural Computing Research and Applications Group, School of Computer Science and Informatics, University College Dublin Belfield, Dublin 4 Ireland m.oneill@ucd.ie ISBN e-isbn DOI / Studies in Computational Intelligence ISSN X Library of Congress Control Number: c 2009 Springer-Verlag Berlin Heidelberg This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer.Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Typeset & Cover Design: Scientific Publishing Services Pvt.Ltd.,Chennai,India. Printed in acid-free paper springer.com

5 To Maria Tony To Gráinne and Aoife Michael

6 Preface Recent years have seen the widespread application of Natural Computing algorithms (broadly defined in this context as computer algorithms whose design draws inspiration from phenomena in the natural world) for the purposes of financial modelling and optimisation. A related stream of work has also seen the application of learning mechanisms drawn from Natural Computing algorithms for the purposes of agent-based modelling in finance and economics. In this book we have collected a series of chapters which illustrate these two faces of Natural Computing. The first part of the book illustrates how algorithms inspired by the natural world can be used as problem solvers to uncover and optimise financial models. The second part of the book examines a number agent-based simulations of financial systems. This book consists of ten chapters each of which was selected following a rigorous, peer-reviewed, selection process. The chapters illustrate the application of a range of cutting-edge natural computing and agent-based methodologies in computational finance and economics. While describing cutting edge applications, the chapters are written so that they are accessible to a wide audience. Hence, they should be of interest to academics, students and practitioners in the fields of computational finance and economics. The inspiration for this book was due in part to the success of EvoFIN 2008, the 2 nd European Workshop on Evolutionary Computation in Finance and Economics. EvoFIN 2008 took place in conjunction with Evo* 2008 in Naples, Italy (26-28 March 2008). Evo* is an annual collection of European conferences and workshops broadly focused on Evolutionary Computation, and is the largest European event dedicated to this field of research. Some of the chapters presented in this book are extended versions of papers presented at EvoFIN 2008, which have also undergone the same rigorous, peer-reviewed, selection process as the other chapters. This book follows on from Natural Computing in Computational Finance (Volume 100 in Springer s Studies in Computational Intelligence series) which in turn arose from the success of EvoFIN 2007, the very first European

7 VIII Preface Workshop on Evolutionary Computation in Finance & Economics held in Valencia, Spain in April We would like to thank all the authors for their high-quality contributions and the reviewers who generously gave of their time to peer-review all submissions. We also extend our thanks to Dr. Thomas Ditzinger of Springer-Verlag and to Professor Janusz Kacprzyk, editor of this book series, for their encouragement of, and their support during, the preparation of this book. Dublin November 2008 Anthony Brabazon Michael O Neill

8 Contents 1 Natural Computing in Computational Finance (Volume 2): Introduction Anthony Brabazon, Michael O Neill... 1 Part I Financial Modelling 2 Statistical Arbitrage with Genetic Programming Philip Saks, Dietmar Maringer Finding Relevant Variables in a Financial Distress Prediction Problem Using Genetic Programming and Self-organizing Maps E. Alfaro-Cid, A.M. Mora, J.J. Merelo, A.I. Esparcia-Alcázar, K. Sharman Ant Colony Optimization for Option Pricing Sameer Kumar, Ruppa K. Thulasiram, Parimala Thulasiraman A Neuro-Evolutionary Approach for Interest Rate Modelling Robert Bradley, Anthony Brabazon, Michael O Neill Who s Smart and Who s Lucky? Inferring Trading Strategy, Learning and Adaptation in Financial Markets through Data Mining Christopher R. Stephens, José Luis Gordillo, Enrique Martinéz Miranda Part II Agent-Based Modelling 7 Financial Bubbles: A Learning Effect Modelling Approach Tsung-Han Hsieh, Youwei Li, Donal G. McKillop

9 X Contents 8 Evolutionary Computation and Artificial Financial Markets Serafin Martinez-Jaramillo, Edward P.K. Tsang Classical and Agent-Based Evolutionary Algorithms for Investment Strategies Generation Rafa l Dreżewski, Jan Sepielak, Leszek Siwik Income Distribution and Lottery Expenditures in Taiwan: An Analysis Based on Agent-Based Simulation Shu-Heng Chen, Bin-Tzong Chie, Hui-Fen Fan, Tina Yu The Emergence of a Market: What Efforts Can Entrepreneurs Make? Shuyuan Wu, Anthony Brabazon Index Author Index