A Radial Basis Function Approach to Financial Time Series Analysis

Nonlinear multivariate statistical techniques on fast computers offer the potential to capture more of the dynamics of the high dimensional, noisy systems underlying financial markets than traditional models, while making fewer restrictive assumptions. This thesis presents a collection of practical techniques to address important estimation and confidence issues for Radial Basis Function networks arising from such a data driven approach, including efficient methods for parameter estimation and pruning, a pointwise prediction error estimator, and a methodology for controlling the "data mining'' problem. Novel applications in the finance area are described, including customized, adaptive option pricing and stock price prediction.

Hypothesizing Device Mechanisms: Opening Up the Black Box

I describe an approach to forming hypotheses about hidden mechanism configurations within devices given external observations and a vocabulary of primitive mechanisms. An implemented causal modelling system called JACK constructs explanations for why a second piece of toast comes out lighter, why the slide in a tire gauge does not slip back inside when the gauge is removed from the tire, and how in a refrigerator a single substance can serve as a heat sink for the interior and a heat source for the exterior. I report the number of hypotheses admitted for each device example, and provide empirical results which isolate the pruning power due to different constraint sources.

Heuristics for Job-Shop Scheduling

Two methods of obtaining approximate solutions to the classic General Job-shop Scheduling Program are investigated. The first method is iterative. A sampling of the solution space is used to decide which of a collection of space pruning constraints are consistent with "good" schedules. The selected space pruning constraints are then used to reduce the search space and the sampling is repeated. This approach can be used either to verify whether some set of space pruning constraints can prune with discrimination or to generate solutions directly. Schedules can be represented as trajectories through a Cartesian space. Under the objective criteria of Minimum maximum Lateness family of "good" schedules (trajectories) are geometric neighbors (reside with some "tube") in this space. This second method of generating solutions takes advantage of this adjacency by pruning the space from the outside in thus converging gradually upon this "tube." One the average this methods significantly outperforms an array of the Priority Dispatch rules when the object criteria is that of Minimum Maximum Lateness. It also compares favorably with a recent relaxation procedure.