Higher Order Neural Network for Financial Modeling and Simulation

Abstract

Financial market creates a complex and ever changing environment in which population of investors are competing for profit. Predicting the future for financial gain is a difficult and challenging task, however at the same time it is a profitable activity. Hence, the ability to obtain the highly efficient financial model has become increasingly important in the competitive world. To cope with this, we consider functional link artificial neural networks (FLANNs) trained by particle swarm optimization (PSO) for stock index prediction (PSO-FLANN). Our strong experimental conviction confirms that the performance of PSO tuned FLANN model for the case of lower number of ahead prediction task is promising. In most cases LMS updated algorithm based FLANN model proved to be as good as or better than the RLS updated algorithm based FLANN but at the same time RLS updated FLANN model for the prediction of stock index system cannot be ignored.