Risk of Transfer Learning and its Applications in Finance

Transfer learning is an emerging and popular paradigm for utilizing existing knowledge from previous learning tasks to improve the performance of new ones. In this paper, we propose a novel concept of transfer risk and and analyze its properties to evaluate transferability of transfer learning. We apply transfer learning techniques and this concept of transfer risk to stock return prediction and portfolio optimization problems. Numerical results demonstrate a strong correlation between transfer risk and overall transfer learning performance, where transfer risk provides a computationally efficient way to identify appropriate source tasks in transfer learning, including cross-continent, cross-sector, and cross-frequency transfer for portfolio optimization.

The Rise and Potential of Large Language Model Based Agents: A Survey

For a long time, humanity has pursued artificial intelligence (AI) equivalent to or surpassing the human level, with AI agents considered a promising vehicle for this pursuit. AI agents are artificial entities that sense their environment, make decisions, and take actions. Many efforts have been made to develop intelligent agents, but they mainly focus on advancement in algorithms or training strategies to enhance specific capabilities or performance on particular tasks. Actually, what the community lacks is a general and powerful model to serve as a starting point for designing AI agents that can adapt to diverse scenarios. Due to the versatile capabilities they demonstrate, large language models (LLMs) are regarded as potential sparks for Artificial General Intelligence (AGI), offering hope for building general AI agents. Many researchers have leveraged LLMs as the foundation to build AI agents and have achieved significant progress. In this paper, we perform a comprehensive survey on LLM-based agents. We start by tracing the concept of agents from its philosophical origins to its development in AI, and explain why LLMs are suitable foundations for agents. Building upon this, we present a general framework for LLM-based agents, comprising three main components: brain, perception, and action, and the framework can be tailored for different applications. Subsequently, we explore the extensive applications of LLM-based agents in three aspects: single-agent scenarios, multi-agent scenarios, and human-agent cooperation. Following this, we delve into agent societies, exploring the behavior and personality of LLM-based agents, the social phenomena that emerge from an agent society, and the insights they offer for human society. Finally, we discuss several key topics and open problems within the field. A repository for the related papers at https://github.com/WooooDyy/LLM-Agent-Paper-List.

FinEval: A Chinese Financial Domain Knowledge Evaluation Benchmark for Large Language Models

Large language models (LLMs) have demonstrated exceptional performance in various natural language processing tasks, yet their efficacy in more challenging and domain-specific tasks remains largely unexplored. This paper presents FinEval, a benchmark specifically designed for the financial domain knowledge in the LLMs. FinEval is a collection of high-quality multiple-choice questions covering Finance, Economy, Accounting, and Certificate. It includes 4,661 questions spanning 34 different academic subjects. To ensure a comprehensive model performance evaluation, FinEval employs a range of prompt types, including zero-shot and few-shot prompts, as well as answer-only and chain-of-thought prompts. Evaluating state-of-the-art Chinese and English LLMs on FinEval, the results show that only GPT-4 achieved an accuracy close to 70% in different prompt settings, indicating significant growth potential for LLMs in the financial domain knowledge. Our work offers a more comprehensive financial knowledge evaluation benchmark, utilizing data of mock exams and covering a wide range of evaluated LLMs.

Transfer Learning for Portfolio Optimization

In this work, we explore the possibility of utilizing transfer learning techniques to address the financial portfolio optimization problem. We introduce a novel concept called "transfer risk", within the optimization framework of transfer learning. A series of numerical experiments are conducted from three categories: cross-continent transfer, cross-sector transfer, and cross-frequency transfer. In particular, 1. a strong correlation between the transfer risk and the overall performance of transfer learning methods is established, underscoring the significance of transfer risk as a viable indicator of "transferability"; 2. transfer risk is shown to provide a computationally efficient way to identify appropriate source tasks in transfer learning, enhancing the efficiency and effectiveness of the transfer learning approach; 3. additionally, the numerical experiments offer valuable new insights for portfolio management across these different settings.

MESOB: Balancing Equilibria & Social Optimality

Motivated by bid recommendation in online ad auctions, this paper considers a general class of multi-level and multi-agent games, with two major characteristics: one is a large number of anonymous agents, and the other is the intricate interplay between competition and cooperation. To model such complex systems, we propose a novel and tractable bi-objective optimization formulation with mean-field approximation, called MESOB (Mean-field Equilibria & Social Optimality Balancing), as well as an associated occupation measure optimization (OMO) method called MESOB-OMO to solve it. MESOB-OMO enables obtaining approximately Pareto efficient solutions in terms of the dual objectives of competition and cooperation in MESOB, and in particular allows for Nash equilibrium selection and social equalization in an asymptotic manner. We apply MESOB-OMO to bid recommendation in a simulated pay-per-click ad auction. Experiments demonstrate its efficacy in balancing the interests of different parties and in handling the competitive nature of bidders, as well as its advantages over baselines that only consider either the competitive or the cooperative aspects.

Markov $α$-Potential Games: Equilibrium Approximation and Regret Analysis

This paper proposes a new framework to study multi-agent interaction in Markov games: Markov $\alpha$-potential games. Markov potential games are special cases of Markov $\alpha$-potential games, so are two important and practically significant classes of games: Markov congestion games and perturbed Markov team games. In this paper, {$\alpha$-potential} functions for both games are provided and the gap $\alpha$ is characterized with respect to game parameters. Two algorithms -- the projected gradient-ascent algorithm and the sequential maximum improvement smoothed best response dynamics -- are introduced for approximating the stationary Nash equilibrium in Markov $\alpha$-potential games. The Nash-regret for each algorithm is shown to scale sub-linearly in time horizon. Our analysis and numerical experiments demonstrates that simple algorithms are capable of finding approximate equilibrium in Markov $\alpha$-potential games.

On Consistency of Signatures Using Lasso

Signature transforms are iterated path integrals of continuous and discrete-time time series data, and their universal nonlinearity linearizes the problem of feature selection. This paper revisits the consistency issue of Lasso regression for the signature transform, both theoretically and numerically. Our study shows that, for processes and time series that are closer to Brownian motion or random walk with weaker inter-dimensional correlations, the Lasso regression is more consistent for their signatures defined by It\^o integrals; for mean reverting processes and time series, their signatures defined by Stratonovich integrals have more consistency in the Lasso regression. Our findings highlight the importance of choosing appropriate definitions of signatures and stochastic models in statistical inference and machine learning.

Feasibility of Transfer Learning: A Mathematical Framework

Transfer learning is a popular paradigm for utilizing existing knowledge from previous learning tasks to improve the performance of new ones. It has enjoyed numerous empirical successes and inspired a growing number of theoretical studies. This paper addresses the feasibility issue of transfer learning. It begins by establishing the necessary mathematical concepts and constructing a mathematical framework for transfer learning. It then identifies and formulates the three-step transfer learning procedure as an optimization problem, allowing for the resolution of the feasibility issue. Importantly, it demonstrates that under certain technical conditions, such as appropriate choice of loss functions and data sets, an optimal procedure for transfer learning exists. This study of the feasibility issue brings additional insights into various transfer learning problems. It sheds light on the impact of feature augmentation on model performance, explores potential extensions of domain adaptation, and examines the feasibility of efficient feature extractor transfer in image classification.