Applications of Reinforcement Learning in Finance: Trading with a Double Deep Q-Network

Zejnullahu, Frensi; Moser, Maurice; Osterrieder, Jörg Robert (2022). Applications of Reinforcement Learning in Finance: Trading with a Double Deep Q-Network Cornell University 10.48550/arXiv.2206.14267

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This paper presents a Double Deep Q-Network algorithm for trading single assets, namely the E-mini S&P 500 continuous futures contract. We use a proven setup as the foundation for our environment with multiple extensions. The features of our trading agent are constantly being expanded to include additional assets such as commodities, resulting in four models. We also respond to environmental conditions, including costs and crises. Our trading agent is first trained for a specific time period and tested on new data and compared with the long-and-hold strategy as a benchmark (market). We analyze the differences between the various models and the in-sample/out-of-sample performance with respect to the environment. The experimental results show that the trading agent follows an appropriate behavior. It can adjust its policy to different circumstances, such as more extensive use of the neutral position when trading costs are present. Furthermore, the net asset value exceeded that of the benchmark, and the agent outperformed the market in the test set. We provide initial insights into the behavior of an agent in a financial domain using a DDQN algorithm. The results of this study can be used for further development.

Item Type:	Working Paper
Division/Institute:	Business School > Institute for Applied Data Science & Finance Business School > Institute for Applied Data Science & Finance > Finance, Accounting and Tax Business School > Institute for Applied Data Science & Finance > Applied Data Science Business School
Name:	Zejnullahu, Frensi; Moser, Maurice and Osterrieder, Jörg Robert0000-0003-0189-8636
Subjects:	H Social Sciences > HG Finance
Publisher:	Cornell University
Language:	English
Submitter:	Jörg Robert Osterrieder
Date Deposited:	22 Aug 2022 11:46
Last Modified:	29 Aug 2022 15:21
Publisher DOI:	10.48550/arXiv.2206.14267
ARBOR DOI:	10.24451/arbor.17395
URI:	https://arbor.bfh.ch/id/eprint/17395