
Not random and not a forest: black-box ML turns white
UBS tackles problem of optimal order placement in FX smart order router with machine learning

The machine learning (ML) tidal wave is sweeping finance, alongside most other industries. Our quants are busy applying new models to various (often old) problems: reinforcement learning for option pricing, deep neural networks for alpha generation, and so on.
Alas, colleagues in model validation – and possibly our regulators – are less enthusiastic and likely with good reason. These models are often black boxes, making it close to impossible, for example, to explain why an algorithm was short
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