Stock Volatility Forecasting with Transformer Network
Bibliographic record
Abstract
Financial market is in general volatile with so many uncertainties and volatility is one of the main measures of uncertainty in the market among other measures. Hence, forecasting volatility is a critical component in risk management, optimizing portfolios, and in algorithmic trading among other financial problems. There have been few machine learning and artificial intelligence techniques used in the literature for the forecasting problem. Transformer Network (TN) architecture is one of newest such techniques proposed. In this work, we utilized this architecture with multi-head attention mechanism for volatility forecasting. To enhance the performance of the TN, we incorporated different variations of the feed forward layer. The performance of three distinct TN models was evaluated by implementing three different deep learning layers (CNN, LSTM, and a hybrid layer (CNN-LSTM)) in the encoder block of TN as the feed forward layer. The results clearly demonstrate that the TN model with the hybrid layer (CNN-LSTM) outperformed the other models, including a recently proposed data-driven approach.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.012 | 0.005 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.004 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.002 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".