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Institute
Machine Learning (ML) is so pervasive in our todays life that we don't even realise that, more often than expected, we are using systems based on it. It is also evolving faster than ever before. When deploying ML systems that make decisions on their own, we need to think about their ignorance of our uncertain world. The uncertainty might arise due to scarcity of the data, the bias of the data or even a mismatch between the real world and the ML-model. Given all these uncertainties, we need to think about how to build systems that are not totally ignorant thereof. Bayesian ML can to some extent deal with these problems. The specification of the model using probabilities provides a convenient way to quantify uncertainties, which can then be included in the decision making process.
In this thesis, we introduce the Bayesian ansatz to modeling and apply Bayesian ML models in finance and economics. Especially, we will dig deeper into Gaussian processes (GP) and Gaussian process latent variable model (GPLVM). Applied to the returns of several assets, GPLVM provides the covariance structure and also a latent space embedding thereof. Several financial applications can be build upon the output of the GPLVM. To demonstrate this, we build an automated asset allocation system, a predictor for missing asset prices and identify other structure in financial data.
It turns out that the GPLVM exhibits a rotational symmetry in the latent space, which makes it harder to fit. Our second publication reports, how to deal with that symmetry. We propose another parameterization of the model using Householder transformations, by which the symmetry is broken. Bayesian models are changed by reparameterization, if the prior is not changed accordingly. We provide the correct prior distribution of the new parameters, such that the model, i.e. the data density, is not changed under the reparameterization. After applying the reparametrization on Bayesian PCA, we show that the symmetry of nonlinear models can also be broken in the same way.
In our last project, we propose a new method for matching quantile observations, which uses order statistics. The use of order statistics as the likelihood, instead of a Gaussian likelihood, has several advantages. We compare these two models and highlight their advantages and disadvantages. To demonstrate our method, we fit quantiled salary data of several European countries. Given several candidate models for the fit, our method also provides a metric to choose the best option.
We hope that this thesis illustrates some benefits of Bayesian modeling (especially Gaussian processes) in finance and economics and its usage when uncertainties are to be quantified.
Diese Bachelorarbeit befasst sich mit der Themenklassifikation von unstrukturiertem Text. Aufgrund der stetig steigenden Menge von textbasierten Daten werden automatisierte Klassifikationsmethoden in vielen Disziplinen benötigt und erforscht. Aufbauend auf dem text2ddc-Klassifikator, der am Text Technology Lab der Goethe-Universität Frankfurt am Main entwickelt wurde, werden die Auswirkungen der Vergrößerung des Trainingskorpus mittels unterschiedlicher Methoden untersucht. text2ddc nutzt die Dewey Decimal Classification (DDC) als Zielklassifikation und wird trainiert auf Artikeln der Wikipedia. Nach einer Einführung, in der Grundlagen beschrieben werden, wird das Klassifikationsmodell von text2ddc vorgestellt, sowie die Probleme und daraus resultierenden Aufgaben betrachtet. Danach wird die Aktualisierung der bisherigen Daten beschrieben, gefolgt von der Vorstellung der verschiedenen Methoden, das Trainingskorpus zu erweitern. Mit insgesamt elf Sprachen wird experimentiert. Die Evaluation zeigt abschließend die Verbesserungen der Qualität der Klassifikation mit text2ddc auf, diskutiert die problematischen Fälle und gibt Anregungen für weitere zukünftige Arbeiten.