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Article

Observation Time Effects in Reinforcement Learning on Contracts for Difference

Hochschule Ruhr West, University of Applied Sciences, Duisburger Str. 100, 45479 Mülheim an der Ruhr, Germany
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Academic Editor: Thanasis Stengos
J. Risk Financial Manag. 2021, 14(2), 54; https://doi.org/10.3390/jrfm14020054
Received: 22 December 2020 / Revised: 21 January 2021 / Accepted: 23 January 2021 / Published: 27 January 2021
(This article belongs to the Special Issue Machine Learning Applications in Finance)
In this paper, we present a study on Reinforcement Learning optimization models for automatic trading, in which we focus on the effects of varying the observation time. Our Reinforcement Learning agents feature a Convolutional Neural Network (CNN) together with Long Short-Term Memory (LSTM) and act on the basis of different observation time spans. Each agent tries to maximize trading profit by buying or selling one of a number of contracts in a simulated market environment for Contracts for Difference (CfD), considering correlations between individual assets by architecture. To decide which action to take on a specific contract, an agent develops a policy which relies on an observation of the whole market for a certain period of time. We investigate whether or not there exists an optimal observation sequence length, and conclude that such a value depends on market dynamics. View Full-Text
Keywords: machine learning; contracts for difference; deep neural networks machine learning; contracts for difference; deep neural networks
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MDPI and ACS Style

Wehrmann, M.; Zengeler, N.; Handmann, U. Observation Time Effects in Reinforcement Learning on Contracts for Difference. J. Risk Financial Manag. 2021, 14, 54. https://doi.org/10.3390/jrfm14020054

AMA Style

Wehrmann M, Zengeler N, Handmann U. Observation Time Effects in Reinforcement Learning on Contracts for Difference. Journal of Risk and Financial Management. 2021; 14(2):54. https://doi.org/10.3390/jrfm14020054

Chicago/Turabian Style

Wehrmann, Maximilian, Nico Zengeler, and Uwe Handmann. 2021. "Observation Time Effects in Reinforcement Learning on Contracts for Difference" Journal of Risk and Financial Management 14, no. 2: 54. https://doi.org/10.3390/jrfm14020054

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