RiskMinds 2019

Flying Monday to Amsterdam with my colleagues from Superfly Analytics of Danske Bank, including Brian Huge and Ove Scavenius, to attend the RiskMinds 2019 risk management conference and the award ceremony, where our group is nominated for ‘Excellence in risk management and modeling’. We will be presenting our vision of modern risk management systems and the ‘One Analytics’ platform: full front to back consistency with scripting of cash-flows , model hierarchies and AAD. Further, we will present ‘Deep Analytics’: leveraging risk management systems with AI to learn revaluation and risk analytics on the fly. For those unable to attend, we posted our slides online here:

www.deep-analytics.org

click on the picture to see the presentation

Deep learning derivatives pricing

I made two simplistic TensorFlow (1.x) notebooks for the benefit of my students at Copenhagen University, to demonstrate how vanilla neural nets (deeply) learn pricing of European calls and high dimensional basket options, together with a comparison with conventional polynomial regression models (a la LSM) and a quick, simple introduction to the implementation of deep learning models in TensorFlow.

Notebook 1: European call in Black and Scholes

Notebook 2: Basket option in Bachelier

The notebooks run directly on Google colab, in the cloud and on GPU, no installation required.

The lecture slides and material are all found here: github.com/asavine/CompFinLecture

Some (much) more advanced considerations for efficiently learning prices of trading books, including “twin” neural nets who learn values and risks, and the super efficient differential regularization, are found here: slideshare.net/AntoineSavine/deep-analytics

Recorded workshop from Kings College London: AAD, Backpropagation and Machine Learning in Finance

Back in March, I gave a series of lectures at Kings College London on automatic adjoint differentiation, backpropagation and machine learning, and how it all connects and applies to risk management of financial derivatives.

The lectures were recorded and made freely available online, either from Kings own page:

https://nms.kcl.ac.uk/probability/workshopPages.php?id=8

or, on YouTube:

It is my understanding that the audience at Kings found the talks useful, and I hope that they may be beneficial to a wider audience on the internet.

QuantMinds 2019, Vienna

We had another fantastic conference from QuantMinds last week in Vienna, where I was honored to chair the Numerical and Computational Finance stream. The agenda was dominated by the application of machine learning to derivatives finance.

Brian Huge and I gave a talk on Deep Analytics to a vast audience of delegates, professionals and academics, including Bruno Dupire, Leif Andersen, Jesper Andreasen, Michael Dempster and many others. The room was full and some had to stand in the back for the whole 90 minutes!

Among many presentations focusing on big data, large infrastructures and deep neural networks, our talk stood out by a principled approach and the systematic integration and synergy of new methods from the deep learning world within the mature financial theoretical framework and in combination with other powerful financial techniques. Following Jesper Andreasen’s tradition of “computing XVA on iPad Mini”, we effectively trained small networks, within seconds to minutes, on trader workstations. We also proposed new techniques for the improvement of financial neural networks, not necessarily appropriate to other contexts, but particularly powerful for the pricing and revaluation of derivatives transactions and trading books. The most prominent of these techniques, “differential regularization”, leverages both AAD on the simulation side and back-prop on the neural side.

We extend billion thanks to our exceptional audience for a fantastic reception and feedback, to our colleagues of Danske Bank’s quantitative research for helping us polish the material and delivery, and to Danske Bank itself for encouraging and nurturing the research and development efforts necessary to properly produce game changing technologies like scripting, model hierarchies, parallel simulations, AAD and now, neural analytics.

It goes without saying that we heard other exceptional presentations, including, in my stream alone, Pierre Henry-Labordere‘s ground breaking work on the application of Schrodinger Bridges to stochastic volatility, and Jesper Andreasen’s rare and inspiring talk about scripting.

Outside of the stream, a series of filmed interviews gave me a chance to express my views on automatic differentiation (AAD), its exceptional contribution to risk management, its evolution and its future in quantitative finance combined with machine learning.

Finally, the presentation and interviews gave us an opportunity to introduce Danske Bank’s vision of “One Calculation Engine”. A core principle within Danske Bank’s quantitative research, this is a unique, single and consistent framework for the risk management of derivatives and the computation of regulations like XVA, CCR, FRTB… with the articulation of scripting, model hierarchies, parallel simulation engines, AAD and… deep analytics.

Antoine Savine, May 2019

Reinforcement Learning

Reinforcement Learning, Second Edition

Currently reading Sutton and Barto’s book on reinforcement learning (RL):

mitpress.mit.edu/books/reinforcement-learning-second-edition

This is a highly recommended reading, the best resource I could find on the subject and one of the best books I have seen on Machine Learning in general.

The complicated topic of RL is presented in an incremental, pedagogical and natural manner so that the concepts and equations flow naturally and stick in your mind. Somehow, the authors manage to teach RL in a captivating, even addictive manner without sacrificing rigor or completeness, leaving you with a fulfilling feeling of deep understanding of the subject, especially if you try to complete the numerous exercises and programming assignments. Unfortunately, solutions to exercises or assignments are not provided so readers cannot check the correctness of their understanding against the word of god (the authors), although a number of readers posted their own solutions online.