Areservoir computing approach for forecasting and regenerating both dynamical andtime-delay controlled financial system behavior
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Date
2021-02
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Abstract
Significant research in reservoir computing over the past two decades has revived interest
in recurrent neural networks. Owing to its ingrained capability of performing high-speed and
low-cost computations this has become a panacea for multi-variate complex systems hav
ing non-linearity within their relationships. Modelling economic and financial trends has
always been achallenging task owing to their volatile nature and no linear dependence on
associated influencers. Prior studies aimed at effectively forecasting such financial systems,
but, always left a visible room for optimization in terms of cost, speed and modelling com
plexities. Our work employs a reservoir computing approach complying to echo-state net
work principles, along with varying strengths of time-delayed feedback to model a complex
financial system. The derived model is demonstrated to act robustly towards influence of
trends and other fluctuating parameters by effectively forecasting long-term system behav
ior. Moreover, it also re-generates the financial system unknowns with a high degree of
accuracy when only limited future data is available, thereby, becoming a reliable feeder for any long-term decision making or policy formulations.