
Machine Learning for Finance
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In this section, we will be introducing some practical tips for building RL systems. We will also highlight some current research frontiers that are highly relevant to financial practitioners.
Reinforcement learning is the field of designing algorithms that maximize a reward function. However, creating good reward functions is surprisingly hard. As anyone who has ever managed people will know, both people and machines game the system.
The literature on RL is full of examples of researchers finding bugs in Atari games that had been hidden for years but were found and exploited by an RL agent. For example, in the game "Fishing Derby," OpenAI has reported a reinforcement learning agent achieving a higher score than is ever possible according to the game makers, and this is without catching a single fish!
While it is fun for games, such behavior can be dangerous when it occurs in financial markets. An agent trained on maximizing returns...