A Dynamic Fuzzy Money Management Approach for Controlling the Intraday Risk‐Adjusted Performance of AI Trading Algorithms. Issue 2 (7th November 2014)

• Record Type: Journal Article
• Authors: Vella, Vince; Ng, Wing Lon
• Is Part Of: Intelligent systems in accounting, finance and management. Volume 22:Issue 2(2015)
• Page Start: 153
• Page End: 178
• Publication Date: 2014-11-07
• Subjects: Accounting -- Data processing -- Periodicals; Business -- Data processing -- Periodicals; Expert systems (Computer science) -- Periodicals; Artificial intelligence -- Periodicals; 657.028563
• DOI: 10.1002/isaf.1359
• Languages: English
• ISSNs: 1055-615X

Abstract

<abstract abstract-type="main"> <title>Summary</title> <p>The majority of existing artificial intelligence (AI) studies in computational finance literature are devoted solely to predicting market movements. In this paper we shift the attention to how AI can be applied to control risk‐based money management decisions. We propose an innovative fuzzy logic approach which identifies and categorizes technical rules performance across different regions in the trend and volatility space. The model dynamically prioritizes higher performing regions at an intraday level and adapts money management policies with the objective to maximize global risk‐adjusted performance. By adopting a hybrid method in conjunction with a popular neural network (NN) trend prediction model, our results show significant performance improvements compared with both standard NN and buy‐and‐hold approaches. Copyright © 2014 John Wiley &amp; Sons, Ltd.</p> </abstract>