Abstract
The financial industry is becoming more and more dependent on advanced computer technologies in order to maintain competitiveness in a global economy. Neural networks represent an exciting technology with a wide scope for potential applications, ranging from routine credit assessment operations to driving of large scale portfolio management strategies. Some of these applications have already resulted in dramatic increases in productivity. This paper brings together, from diverse sources, a collection of current research issues on neural networks in the financial domain. It examines a range of neural network systems related to financial applications from different levels of maturity to fielded products. It discusses the success rate of the neural network systems, and their performance in resolving particular financial problems.
Similar content being viewed by others
References
Caudill M, Butler C. Naturally Intelligent Systems. MIT Press, Cambridge, MA, 1990
Freedman RS. AI on Wall Street. IEEE Expert 1991; 3–9
Refenes AN, Zapranis AD. Neural Networks in Tactical Asset Location: A Comparative Study with Regression Models. London Business School, Department of Decision Science, London, 1993
Lapedes A, Farber R. Nonlinear Signal Processing Using Neural Networks, Prediction and System Modelling. Los Alamos Report LAUR-87-2662, Los Alamos National Laboratory, NM, 1987
MacKay C. Extraordinary Popular Delusions and the Madness of Crowds. Noonday Press, (Rep. of 19th century ed.), New York, 1974
O'Reilly B. Computers that think like people. Fortune February 1989; 58–61
White H. Economic prediction using neural nets: The case of the IBM daily stock returns. Proc IEEE International Conference on Neural Networks 1988; 2: II451-II458
Davidson C. Trained to think. Technology 1994; 7(3)
Marose RA. A financial neural network application. AI Expert May 1990; 50–53
Barker D. Analysing financial health: Integrating neural networks and expert systems. PCAI May/June 1990; 24–27
Berry RH, Trigueiros D. Applying neural networks to the extraction of knowledge from accounting reports: A classification study. In: Trippi, Turban (eds). Neural Networks in Financing and Investing. Probus Publishing, 1993; 103–123
Klemic GG. The use of neural network computing technology to develop profiles of Chapter 11 debtors who are likely to become tax. In: Trippi, Turban (eds). Neural Networks in Financing and Investing. Probus Publishing, 1993; 125–136
Raghupathi W, Schkade L, Raju BS. A neural network approach to bankruptcy prediction. Proc IEEE 24th Annual Hawaii International Conference on Systems Sciences 1991
Rahimian E, Singh S, Thammachote T, Virmani R. Bankruptcy prediction by neural network. In: Trippi, Turban (eds). Neural Networks in Financing and Investing. Probus Publishing, 1993; 159–176
Koutsougeras C, Papachristou G. Training of a neural network for pattern classification based on an entropy measure. Proc IEEE ICNN 1988
Koutsougeras C, Papachristou G. Learning discrete mappings — Athena's approach. IEEE September 1988; CH 2636: 31–36
Ballarin A, Gregorio C, Maione A, Basti G, Perrone A. Forecasting corporate bankruptcy: A neural network approach. Proc World Congress on Neural Networks July 1993; 11232–11238
Altman EL. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 1968; 23: 596
Altman EL, Haldeman RG, Narayanan P. Zeta analysis: A new model to identify bankruptcy risk of corporations. Journal of Banking and Finance June 1977; 29–54
Odom MD, Sharda R. A neural networks model for bankruptcy prediction. Proc International Joint Conference on Neural Networks 1990; 2: 163–168
Odom DM, Sharda R. A neural network model for bankruptcy prediction. Proc IEEE International Conference on Neural Networks 1993; II163–II168
Coleman GK, Graettinger JT, Lawrence FW. Neural networks for bankruptcy prediction: The power to solve financial problems. AI Review July/August 1991; 48–50
Tam KY, Kiang M. Managerial applications of neural networks: The case of bank failure predictions. Management Science 1992; 38: 926–947
Salchenberger LM, Cinar EM, Lash AN. Neural networks: A new tool for predicting thrift failures. Decision Sciences 1992; 23(4): 899–916
Dutta S, Shekhar S. Bond rating: A non-conservative application of neural networks. Proc IEEE International Conference on Neural Networks 1988; 2: II443-II450
Surkan AJ, Singleton JC. Neural networks for bond rating improved by multiple hidden layers. Proc International Joint Conference on Neural Networks 1990; 2: II163-II168
Diamond C, Shadbolt J, Azema-Barac M, Refenes A. Neural network system for tactical asset allocation in the global bonds markets. Proc IEE 3rd International Conference on Neural Networks, Brighton, 1993
Collins E, Ghosh S, Scofield C. An application of a multiple neural network learning system to emulation of Mortgage Co. underwriting judgements. Proc IEEE International Conference on Neural Networks 1988; 2: II459-II466
Reilly DL, Collins E, Scofield C, Ghosh S. Risk assessment of mortgage applications with a neural network system: An update as the test portfolio ages. Proc IEEE International Conference on Neural Networks July 1991; II479–II482
Burgess AN. Non-linear model identification and statistical tests and their application to financial modelling. Artificial Neural Networks Conference, Publication No. 409, IEE, June 1995; 26–28
Kimoto T, Asakawa K, Yoda M, Takeoka M. Stock market prediction system with modular neural networks. Proc IEEE International Joint Conference on Neural Networks 1990; 11–16
Bosarge Jr. WE. Adaptive processes to exploit the nonlinear structure of financial markets. Neural Networks and Pattern Recognition in Forecasting Financial Markets, Santa Fe Institute of Complexity Conference, February 1991
Bergerson K, Wunsch DC. A commodity trading model based on a neural network-expert system hybrid. Proc IEEE International Conference on Neural Networks 1991; II289–II293
Kamijo K, Tanigawa T. Stock price pattern recognition: A recurrent neural network approach. Proc IEEE International Joint Conference on Neural Network 1990; 1215–1221
Refenes AN, Azema-Barac M. Neural Network Applications in Financial Asset Management. London Business School, Department of Decision Science, London, 1993
Yoon Y, Swales G. Predicting stock price performance: A neural network approach. Proc IEEE 24th Annual International Conference of Systems Sciences January 1991; 156–162
Sharda R, Patil R. A connectionist approach to time series prediction: An empirical test. Journal of Intelligent Manufacturing 1992
Sharda R, Patil R. Neural networks as forecasting experts: An empirical test. International Joint Conference on Neural Networks 1990; II: 491–494
Refenes AN, Bentz Y, Bunn DW, Burgess AN, Zapranis AD. Backpropagation with discounted least squares and its application to financial time series modelling. Neural Networks for Computing Conference, Snowbird, UT, April 1994
Zwol W, Bots A. Experiments with neural networks: Forecasting the German inflation rate. International Conference on Artificial Neural Networks 1994; II: 879–882
Refenes AN, Azema-Barac M, Chen L, Karoussos SA. Currency exchange rate prediction and neural network design strategies. Neural Computing & Application 1992
Tang Z, de Almedia C, Fishwick PA. Time series forecasting using neural networks vs. Box-Jenkins methodology. International Workshop on Neural Networks, Aubum, AL, February 1990
Fishwick P. Neural network models in simulation: A comparison with traditional modelling approaches. Proc Winter Simulation Conference 1989; 702–710
Burgess AN, Bunn DW, Refenes AN. Neural Networks With Error Feedback Terms For Financial Time Series Modelling. Department of Decision Science, London Business School, London, June 1995
Marquez L, Hill T, Worthley R, Remus W. Neural network models as an alternative to regression. Proc IEEE 24th Annual Hawaii International Conference on Systems Sciences 1991; VI: 129–135
Fahlman SE, Leibiere C. The cascade-correlation learning architecture. In: DS Tourezkey (ed). Advances in Neural Information Processing Systems 2. Morgan Kaufmann, San Mateo, CA, 1990; 524–532
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Burrell, P.R., Folarin, B.O. The impact of neural networks in finance. Neural Comput & Applic 6, 193–200 (1997). https://doi.org/10.1007/BF01501506
Issue Date:
DOI: https://doi.org/10.1007/BF01501506