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You're reading from  Machine Learning for Algorithmic Trading - Second Edition

Product typeBook
Published inJul 2020
Reading LevelIntermediate
PublisherPackt
ISBN-139781839217715
Edition2nd Edition
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Author (1)
Stefan Jansen
Stefan Jansen
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Stefan Jansen

Stefan is the founder and CEO of Applied AI. He advises Fortune 500 companies, investment firms, and startups across industries on data & AI strategy, building data science teams, and developing end-to-end machine learning solutions for a broad range of business problems. Before his current venture, he was a partner and managing director at an international investment firm, where he built the predictive analytics and investment research practice. He was also a senior executive at a global fintech company with operations in 15 markets, advised Central Banks in emerging markets, and consulted for the World Bank. He holds Master's degrees in Computer Science from Georgia Tech and in Economics from Harvard and Free University Berlin, and a CFA Charter. He has worked in six languages across Europe, Asia, and the Americas and taught data science at Datacamp and General Assembly.
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Q-learning – finding an optimal policy on the go

Q-learning was an early RL breakthrough when developed by Chris Watkins for his PhD thesis (http://www.cs.rhul.ac.uk/~chrisw/new_thesis.pdf) (1989). It introduces incremental dynamic programming to learn to control an MDP without knowing or modeling the transition and reward matrices that we used for value and policy iteration in the previous section. A convergence proof followed 3 years later (Christopher J. C. H. Watkins and Dayan 1992).

Q-learning directly optimizes the action-value function q to approximate q*. The learning proceeds "off-policy," that is, the algorithm does not need to select actions based on the policy implied by the value function alone. However, convergence requires that all state-action pairs continue to be updated throughout the training process. A straightforward way to ensure this is through an -greedy policy.

Exploration versus exploitation – -greedy policy

An -greedy...

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Machine Learning for Algorithmic Trading - Second Edition
Published in: Jul 2020Publisher: PacktISBN-13: 9781839217715

Author (1)

author image
Stefan Jansen

Stefan is the founder and CEO of Applied AI. He advises Fortune 500 companies, investment firms, and startups across industries on data & AI strategy, building data science teams, and developing end-to-end machine learning solutions for a broad range of business problems. Before his current venture, he was a partner and managing director at an international investment firm, where he built the predictive analytics and investment research practice. He was also a senior executive at a global fintech company with operations in 15 markets, advised Central Banks in emerging markets, and consulted for the World Bank. He holds Master's degrees in Computer Science from Georgia Tech and in Economics from Harvard and Free University Berlin, and a CFA Charter. He has worked in six languages across Europe, Asia, and the Americas and taught data science at Datacamp and General Assembly.
Read more about Stefan Jansen