Detecting Regime Change in Computational Finance

Data Science, Machine Learning and Algorithmic Trading

Jun Chen and Edward P K Tsang, Research Monograph, CRC Press, 2021

ISBN: 9780367536282 / Preorder: CRC Press / Amazon

About the book:

Based on interdisciplinary research into “Directional Change”, a new data-driven approach to financial data analysis, this book applies machine learning to financial market monitoring and algorithmic trading.

Directional Change is a new way of summarizing price changes in the market. Instead of sampling prices at fixed intervals (such as daily closing in time series), it samples prices when the market changes direction ("zigzag"). By sampling data in a different way, the book lays out concepts which enable the extraction of information that other market participants may not be able to see.

The book includes a Foreword by Richard Olsen and explores the following topics:

Data science: as an alternative to time series, price movements in a market can be summarised as directional changes
Machine learning for regime change detection: historical regime changes in a market can be discovered by a Hidden Markov Model
Regime characterisation: normal and abnormal regimes in historical data can be characterised using indicators defined under Directional Change
Market Monitoring: by using historical characteristics of normal and abnormal regimes, one can monitor the market to detect whether the market regime has changed
Algorithmic trading: regime tracking information can help us to design trading algorithms

It will be of great interest to researchers in computational finance, machine learning, and data science.

About the authors:

Jun Chen (James) received his PhD in computational finance from the Centre for Computational Finance and Economic Agents, University of Essex in 2019.
Edward P K Tsang is an Emeritus Professor at the University of Essex, where he co-founded the Centre for Computational Finance and Economic Agents in 2002. He is a Visiting Professor at University of Hong Kong

Foreword by Richard Olsen, inventor of Directional Change, Co-founder of OANDA, Founder of Lykke

Page created and maintained by Edward Tsang; last updated 2022.03.08
Background: Fractal (Benoit Mandelbrot) generated by Frax