QADQN: Quantum Attention Deep Q-Network for Financial Market Prediction

• URL: http://arxiv.org/abs/2408.03088v1
• Date: Tue, 6 Aug 2024 10:41:46 GMT
• Title: QADQN: Quantum Attention Deep Q-Network for Financial Market Prediction
• Authors: Siddhant Dutta, Nouhaila Innan, Alberto Marchisio, Sadok Ben Yahia, Muhammad Shafique,
• Abstract summary: This paper introduces a Quantum Attention Deep Q-Network (QADQN) approach to address these challenges through quantum-enhanced reinforcement learning. We gauge the QADQN agent's performance on historical data from major market indices, including the S&P 500. Our empirical results demonstrate the QADQN's superior performance, achieving better risk-adjusted returns.
• Score: 6.3671741591443105
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Financial market prediction and optimal trading strategy development remain challenging due to market complexity and volatility. Our research in quantum finance and reinforcement learning for decision-making demonstrates the approach of quantum-classical hybrid algorithms to tackling real-world financial challenges. In this respect, we corroborate the concept with rigorous backtesting and validate the framework's performance under realistic market conditions, by including fixed transaction cost per trade. This paper introduces a Quantum Attention Deep Q-Network (QADQN) approach to address these challenges through quantum-enhanced reinforcement learning. Our QADQN architecture uses a variational quantum circuit inside a traditional deep Q-learning framework to take advantage of possible quantum advantages in decision-making. We gauge the QADQN agent's performance on historical data from major market indices, including the S&P 500. We evaluate the agent's learning process by examining its reward accumulation and the effectiveness of its experience replay mechanism. Our empirical results demonstrate the QADQN's superior performance, achieving better risk-adjusted returns with Sortino ratios of 1.28 and 1.19 for non-overlapping and overlapping test periods respectively, indicating effective downside risk management.

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