Domain-adapted Learning and Interpretability: DRL for Gas Trading

Yuanrong Wang, Yinsen Miao, Alexander CY Wong, Nikita P Granger and Christian Michler

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Abstract: Deep Reinforcement Learning (Deep RL) has been explored for a number of applications in finance and stock trading. In this paper, we present a practical implementation of Deep RL for trading natural gas futures contracts. The Sharpe Ratio obtained exceeds benchmarks given by trend following and mean reversion strategies as well as results reported in literature. Moreover, we propose a simple but effective ensemble learning scheme for trading, which significantly improves performance through enhanced model stability and robustness as well as lower turnover and hence lower transaction cost. We discuss the resulting Deep RL strategy in terms of model explainability, trading frequency and risk measures.

Date: 2023-01, Revised 2023-09
New Economics Papers: this item is included in nep-big, nep-cmp and nep-ene
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