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MQLV: Optimal Policy of Money Management in Retail Banking with Q-Learning
Charlier, Jérémy Henri J.; Ormazabal, Gaston; State, Radu et al.
2019In Proceedings of the Fourth Workshop on MIning DAta for financial applicationS (MIDAS 2019) co-located with the 2019 European Conference on Machine Learning and Principles and Practice of Knowledge Discovery in Databases (ECML-PKDD 2019)
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Keywords :
Q-learning; Monte-Carlo; Payment Transactions
Abstract :
[en] Reinforcement learning has become one of the best approach to train a computer game emulator capable of human level performance. In a reinforcement learning approach, an optimal value function is learned across a set of actions, or decisions, that leads to a set of states giving different rewards, with the objective to maximize the overall reward. A policy assigns to each state-action pairs an expected return. We call an optimal policy a policy for which the value function is optimal. QLBS, Q-Learner in the Black-Scholes(-Merton) Worlds, applies the reinforcement learning concepts, and noticeably, the popular Q-learning algorithm, to the financial stochastic model of Black, Scholes and Merton. It is, however, specifically optimized for the geometric Brownian motion and the vanilla options. Its range of application is, therefore, limited to vanilla option pricing within the financial markets. We propose MQLV, Modified Q-Learner for the Vasicek model, a new reinforcement learning approach that determines the optimal policy of money management based on the aggregated financial transactions of the clients. It unlocks new frontiers to establish personalized credit card limits or bank loan applications, targeting the retail banking industry. MQLV extends the simulation to mean reverting stochastic diffusion processes and it uses a digital function, a Heaviside step function expressed in its discrete form, to estimate the probability of a future event such as a payment default. In our experiments, we first show the similarities between a set of historical financial transactions and Vasicek generated transactions and, then, we underline the potential of MQLV on generated Monte Carlo simulations. Finally, MQLV is the first Q-learning Vasicek-based methodology addressing transparent decision making processes in retail banking.
Research center :
Interdisciplinary Centre for Security, Reliability and Trust (SnT) > Services and Data management research group (SEDAN)
Disciplines :
Computer science
Author, co-author :
Charlier, Jérémy Henri J. ;  University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT)
Ormazabal, Gaston
State, Radu  ;  University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT)
Hilger, Jean ;  University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT)
External co-authors :
yes
Language :
English
Title :
MQLV: Optimal Policy of Money Management in Retail Banking with Q-Learning
Publication date :
September 2019
Event name :
Fourth Workshop on MIning DAta for financial applicationS (MIDAS 2019) co-located with the 2019 European Conference on Machine Learning and Principles and Practice of Knowledge Discovery in Databases (ECML-PKDD} 2019)
Event organizer :
ECML PKDD
Event place :
Würzburg, Germany
Event date :
from 16-09-2019 to 20-09-2019
Audience :
International
Journal title :
Proceedings of the Fourth Workshop on MIning DAta for financial applicationS (MIDAS 2019) co-located with the 2019 European Conference on Machine Learning and Principles and Practice of Knowledge Discovery in Databases (ECML-PKDD 2019)
Peer reviewed :
Peer reviewed
Available on ORBilu :
since 12 September 2019

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