Method and apparatus for foreign exchange rate time series prediction and classification

• US 5,761,386 A
• Filed: 06/16/1997
• Issued: 06/02/1998
• Est. Priority Date: 04/05/1996
• Status: Expired due to Term

• Current Assignee: NEC Corporation
• Original Assignee: NEC Research Institute, Inc. (NEC Corporation)
• Inventors: Lawrence, Stephen Robert, Giles, C. Lee
• Primary Examiner(s): MacDonald, Allen R.
• Assistant Examiner(s): Smith, Jeffrey S.
• Application Number:
  US08/876,722
• Time in Patent Office: 351 Days
• Field of Search: 395/11, 395/22, 395/23, 705/10, 705/35
• US Class Current: 706/20
• CPC Class Codes: G06F 2218/08 Feature extraction
• CPC Class Codes: G06N 3/049 Temporal neural networks, e.g. delay elements, oscillating neurons or pulsed inputs
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: Y10S 706/925 Business

Abstract

A method and apparatus for the prediction of time series data, specifically, the prediction of a foreign currency exchange rate. The method disclosed transforms the time series data into a difference of a series, compresses the transformed data using a log transformation, converts the compressed data into symbols, and subsequently trains one or more neural networks on the symbols such that a prediction is generated. Alternative embodiments demonstrate the conversion by a self-organizing map and training by a recurrent neural network.

Claims

1. A system for predicting foreign exchange rate time series data comprising:

a means for preprocessing which receives the foreign exchange rate time series data and then transforms the foreign exchange rate data;

a means for symbolic conversion that produces a sequence of symbols from the transformed foreign exchange rate data, wherein said symbolic conversion means includes a self-organizing map neural network having a plurality of nodes, wherein each one of said nodes is an independent symbol and each one of said symbols is encoded according to a topological ordering of the nodes in the self organizing map;

a means for grammatical inference which predicts a given foreign exchange rate from the sequence of symbols produced by the self-organizing map neural network, wherein said grammatical inference means includes an Elman recurrent neural network having an input layer, an output layer and a hidden layer, each layer comprising one or more nodes, each node in the input layer being connected to each node in the hidden layer and each node in the hidden layer being connected to each node in the output layer as well as each node in the hidden layer such that said predicted foreign exchange rate is dependent upon both the sequence of symbols and a current state of said recurrent neural network;

a means for rule extraction which extracts, using an extraction method, one or more production rules from the grammatical inference means regarding the prediction of the given foreign exchange rate; and

a means for confidence estimation which estimates a confidence of the given foreign exchange rate wherein the confidence estimation means generates the confidence estimate of the prediction of the foreign exchange rate using outputs of the grammatical inference means according to y_m (y_m -y_2m) where y_m is a maximum and y_2m is a second maximum output of the recurrent neural network;

wherein the given foreign exchange rate predicted by the grammatical inference means, the production rules extracted by the rule extraction means and the confidence estimate of the foreign exchange rate estimated by the confidence estimation means are continuously generated and dependent upon a respective input and a current state of the recurrent neural network.

2. The prediction system according to claim 1 further comprising:

a means for rule interpretation which interprets the extracted rules.

3. The prediction system according to claim 1 wherein said foreign exchange rate data is nonstationary and said preprocessing module further comprises:

a means for differencing which reduces the nonstationarity of the foreign exchange rate data.

4. The prediction system according to claim 1 wherein said preprocessing module further comprises:

a means for compressing which produces a log compression of the foreign exchange rate data.

5. The prediction system according to claim 1 wherein said rule extraction means further comprises:

a means for quantizing which quantizes a state space of hidden nodes contained in the grammatical inference means such that a deterministic finite state automata corresponding to training data is obtained.