Nowcasting Networks

Marc Chataigner (), Stéphane Crépey () and Jiang Pu
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Stéphane Crépey: UFR Mathématiques UPCité - UFR Mathématiques [Sciences] - Université Paris Cité - UPCité - Université Paris Cité, LPSM (UMR_8001) - Laboratoire de Probabilités, Statistique et Modélisation - UPD7 - Université Paris Diderot - Paris 7 - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique

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Abstract: We devise a neural network based compression/completion methodology for financial nowcasting. The latter is meant in a broad sense encompassing completion of gridded values, interpolation, or outlier detection, in the context of financial time series of curves or surfaces (also applicable in higher dimensions, at least in theory). In particular, we introduce an original architecture amenable to the treatment of data defined at variable grid nodes (by far the most common situation in financial nowcasting applications, so that PCA or classical autoencoder methods are not applicable). This is illustrated by three case studies on real data sets. First, we introduce our approach on repo curves data (with moving time-to-maturity as calendar time passes). Second, we show that our approach outperforms elementary interpolation benchmarks on an equity derivative surfaces data set (with moving time-to-maturity again). We also obtain a satisfying performance for outlier detection and surface completion. Third, we benchmark our approach against PCA on at-the-money swaption surfaces redefined at constant expiry/tenor grid nodes. Our approach is then shown to perform as well as (even if not obviously better than) the PCA (which, however, is not be applicable to the native, raw data defined on a moving timeto-expiry grid).

Keywords: neural networks; autoencoders; equity derivative Black-Scholes implied volatilities; swaption implied normal volatilities; repo rates; data compression; data completion; outliers (search for similar items in EconPapers)
Date: 2020
Note: View the original document on HAL open archive server: https://hal.science/hal-03910123v1
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Published in Journal of Computational Intelligence in Finance, 2020

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