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A novel CNN-DDPG based AI-trader: Performance and roles in business operations

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  • Luo, Suyuan
  • Lin, Xudong
  • Zheng, Zunxin

Abstract

Artificial Intelligence (AI) is well-developed as a part of human life. In both financial markets and business operations, AI is getting more and more important. In this paper, we build a novel “Reinforcement Learning” (RL) framework based AI-trader. We adopt an actor-critic RL algorithm called “Deep Deterministic Policy Gradient” (DDPG) to find the optimal policy. Our proposed DDPG has two different convolutional neutral networks (CNNs) based function approximators. The proposed AI-trader’s performance is shown to outperform other methods with the use of real stock-index future data. We further discuss the generalization and implications of the proposed method for business operations.

Suggested Citation

  • Luo, Suyuan & Lin, Xudong & Zheng, Zunxin, 2019. "A novel CNN-DDPG based AI-trader: Performance and roles in business operations," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 131(C), pages 68-79.
    • Handle: RePEc:eee:transe:v:131:y:2019:i:c:p:68-79
    DOI: 10.1016/j.tre.2019.09.013
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    References listed on IDEAS

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    4. Loske, Dominic & Klumpp, Matthias, 2021. "Human-AI collaboration in route planning: An empirical efficiency-based analysis in retail logistics," International Journal of Production Economics, Elsevier, vol. 241(C).
    5. Shrutika Mishra & A. R. Tripathi, 2021. "AI business model: an integrative business approach," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-21, December.
    6. Wang, Yingjia & Lin, Jiaxin & Choi, Tsan-Ming, 2020. "Gray market and counterfeiting in supply chains: A review of the operations literature and implications to luxury industries," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    7. Gabriel Borrageiro & Nick Firoozye & Paolo Barucca, 2021. "Reinforcement Learning for Systematic FX Trading," Papers 2110.04745, arXiv.org, revised May 2022.
    8. Mehran Taghian & Ahmad Asadi & Reza Safabakhsh, 2021. "A Reinforcement Learning Based Encoder-Decoder Framework for Learning Stock Trading Rules," Papers 2101.03867, arXiv.org.
    9. Wen, Xin & Siqin, Tana, 2020. "How do product quality uncertainties affect the sharing economy platforms with risk considerations? A mean-variance analysis," International Journal of Production Economics, Elsevier, vol. 224(C).
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    12. Zhishun Wang & Wei Lu & Kaixin Zhang & Tianhao Li & Zixi Zhao, 2021. "A parallel-network continuous quantitative trading model with GARCH and PPO," Papers 2105.03625, arXiv.org, revised May 2021.

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