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Mahmoud Mahfouz

Publications and source records attributed to Mahmoud Mahfouz.

10 recordsLinked to original sources

Learning to Manage Investment Portfolios beyond Simple Utility Functions

While investment funds publicly disclose their objectives in broad terms, their managers optimize for complex combinations of competing goals that go beyond simple risk-return trade-offs. Traditional approaches attempt to model this through multi-objective utility functions, but face fundamental challenges in specification and parameterization. We propose a generative framework that learns latent representations of fund manager strategies without requiring explicit utility specification. Our approach directly models the conditional probability of a fund's portfolio weights, given stock characteristics, historical returns, previous weights, and a latent variable representing the fund's strategy. Unlike methods based on reinforcement learning or imitation learning, which require specified rewards or labeled expert objectives, our GAN-based architecture learns directly from the joint distribution of observed holdings and market data. We validate our framework on a dataset of 1436 U.S. equity mutual funds. The learned representations successfully capture known investment styles, such as "growth" and "value," while also revealing implicit manager objectives. For instance, we find that while many funds exhibit characteristics of Markowitz-like optimization, they do so with heterogeneous realizations for turnover, concentration, and latent factors. To analyze and interpret the end-to-end model, we develop a series of tests that explain the model, and we show that the benchmark's expert labeling are contained in our model's encoding in a linear interpretable way. Our framework provides a data-driven approach for characterizing investment strategies for applications in market simulation, strategy attribution, and regulatory oversight.

q-fin.PM

Capacity Planning and Scheduling for Jobs with Uncertainty in Resource Usage and Duration

Organizations around the world schedule jobs (programs) regularly to perform various tasks dictated by their end users. With the major movement towards using a cloud computing infrastructure, our organization follows a hybrid approach with both cloud and on-prem servers. The objective of this work is to perform capacity planning, i.e., estimate resource requirements, and job scheduling for on-prem grid computing environments. A key contribution of our approach is handling uncertainty in both resource usage and duration of the jobs, a critical aspect in the finance industry where stochastic market conditions significantly influence job characteristics. For capacity planning and scheduling, we simultaneously balance two conflicting objectives: (a) minimize resource usage, and (b) provide high quality-of-service to the end users by completing jobs by their requested deadlines. We propose approximate approaches using deterministic estimators and pair sampling-based constraint programming. Our best approach (pair sampling-based) achieves much lower peak resource usage compared to manual scheduling without compromising on the quality-of-service.

cs.DC

Towards Robust Representation of Limit Orders Books for Deep Learning Models

The success of deep learning-based limit order book forecasting models is highly dependent on the quality and the robustness of the input data representation. A significant body of the quantitative finance literature focuses on utilising different deep learning architectures without taking into consideration the key assumptions these models make with respect to the input data representation. In this paper, we highlight the issues associated with the commonly-used representations of limit order book data from both a theoretical and practical perspectives. We also show the fragility of the representations under adversarial perturbations and propose two simple modifications to the existing representations that match the theoretical assumptions of deep learning models. Finally, we show experimentally how our proposed representations lead to state-of-the-art performance in both accuracy and robustness utilising very simple neural network architectures.

q-fin.TR

Learning to Classify and Imitate Trading Agents in Continuous Double Auction Markets

Continuous double auctions such as the limit order book employed by exchanges are widely used in practice to match buyers and sellers of a variety of financial instruments. In this work, we develop an agent-based model for trading in a limit order book and show (1) how opponent modelling techniques can be applied to classify trading agent archetypes and (2) how behavioural cloning can be used to imitate these agents in a simulated setting. We experimentally compare a number of techniques for both tasks and evaluate their applicability and use in real-world scenarios.

q-fin.CP

How Robust are Limit Order Book Representations under Data Perturbation?

The success of machine learning models in the financial domain is highly reliant on the quality of the data representation. In this paper, we focus on the representation of limit order book data and discuss the opportunities and challenges for learning representations of such data. We also experimentally analyse the issues associated with existing representations and present a guideline for future research in this area.

q-fin.TR

A Framework for Institutional Risk Identification using Knowledge Graphs and Automated News Profiling

Organizations around the world face an array of risks impacting their operations globally. It is imperative to have a robust risk identification process to detect and evaluate the impact of potential risks before they materialize. Given the nature of the task and the current requirements of deep subject matter expertise, most organizations utilize a heavily manual process. In our work, we develop an automated system that (a) continuously monitors global news, (b) is able to autonomously identify and characterize risks, (c) is able to determine the proximity of reaching triggers to determine the distance from the manifestation of the risk impact and (d) identifies organization's operational areas that may be most impacted by the risk. Other contributions also include: (a) a knowledge graph representation of risks and (b) relevant news matching to risks identified by the organization utilizing a neural embedding model to match the textual description of a given risk with multi-lingual news.

cs.AI

Compression and Interpretability of Deep Neural Networks via Tucker Tensor Layer: From First Principles to Tensor Valued Back-Propagation

This work aims to help resolve the two main stumbling blocks in the application of Deep Neural Networks (DNNs), that is, the exceedingly large number of trainable parameters and their physical interpretability. This is achieved through a tensor valued approach, based on the proposed Tucker Tensor Layer (TTL), as an alternative to the dense weight-matrices of DNNs. This allows us to treat the weight-matrices of general DNNs as a matrix unfolding of a higher order weight-tensor. By virtue of the compression properties of tensor decompositions, this enables us to introduce a novel and efficient framework for exploiting the multi-way nature of the weight-tensor in order to dramatically reduce the number of DNN parameters. We also derive the tensor valued back-propagation algorithm within the TTL framework, by extending the notion of matrix derivatives to tensors. In this way, the physical interpretability of the Tucker decomposition is exploited to gain physical insights into the NN training, through the process of computing gradients with respect to each factor matrix. The proposed framework is validated on both synthetic data, and the benchmark datasets MNIST, Fashion-MNIST, and CIFAR-10. Overall, through the ability to provide the relative importance of each data feature in training, the TTL back-propagation is shown to help mitigate the "black-box" nature inherent to NNs. Experiments also illustrate that the TTL achieves a 66.63-fold compression on MNIST and Fashion-MNIST, while, by simplifying the VGG-16 network, it achieves a 10\% speed up in training time, at a comparable performance.

cs.LG

Get Real: Realism Metrics for Robust Limit Order Book Market Simulations

Machine learning (especially reinforcement learning) methods for trading are increasingly reliant on simulation for agent training and testing. Furthermore, simulation is important for validation of hand-coded trading strategies and for testing hypotheses about market structure. A challenge, however, concerns the robustness of policies validated in simulation because the simulations lack fidelity. In fact, researchers have shown that many market simulation approaches fail to reproduce statistics and stylized facts seen in real markets. As a step towards addressing this we surveyed the literature to collect a set of reference metrics and applied them to real market data and simulation output. Our paper provides a comprehensive catalog of these metrics including mathematical formulations where appropriate. Our results show that there are still significant discrepancies between simulated markets and real ones. However, this work serves as a benchmark against which we can measure future improvement.

q-fin.TR

On the Importance of Opponent Modeling in Auction Markets

The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other participants on these dynamics and should employ tools and models that take this into account. To this end, we demonstrate the efficacy of applying opponent-modeling in a number of simulated market settings. While our simulations are simplified representations of actual market dynamics, they provide an idealized "playground" in which our techniques can be demonstrated and tested. We present this work with the aim that our techniques could be refined and, with some effort, scaled up to the full complexity of real-world market scenarios. We hope that the results presented encourage practitioners to adopt opponent-modeling methods and apply them online systems, in order to enable not only reactive but also proactive decisions to be made.

q-fin.CP

How to Evaluate Trading Strategies: Single Agent Market Replay or Multiple Agent Interactive Simulation?

We show how a multi-agent simulator can support two important but distinct methods for assessing a trading strategy: Market Replay and Interactive Agent-Based Simulation (IABS). Our solution is important because each method offers strengths and weaknesses that expose or conceal flaws in the subject strategy. A key weakness of Market Replay is that the simulated market does not substantially adapt to or respond to the presence of the experimental strategy. IABS methods provide an artificial market for the experimental strategy using a population of background trading agents. Because the background agents attend to market conditions and current price as part of their strategy, the overall market is responsive to the presence of the experimental strategy. Even so, IABS methods have their own weaknesses, primarily that it is unclear if the market environment they provide is realistic. We describe our approach in detail, and illustrate its use in an example application: The evaluation of market impact for various size orders.

q-fin.TR