Tuesday, 6 September 2011

The saga of Neural Networks

All of us while doing the assignments for the Business Analytics might have come across the concept of Neural Networks. Let’s have a sneak peek into the basics of Neural networks and some of its applications.

Neural networks are state-of-the-art, trainable algorithms that emulate certain major aspects in the functioning of the human brain. This gives them a unique, self-training ability, the ability to formalize unclassified information and, most importantly, the ability to make forecasts based on the historical information they have at their disposal.

Neural networks have been used increasingly in a variety of business applications, including forecasting and marketing research solutions. In some areas, such as fraud detection or risk assessment, they are the indisputable leaders. The major fields in which neural networks have found application are financial operations, enterprise planning, trading, business analytics and product maintenance. Neural networks can be applied gainfully by all kinds of traders, so if you're a trader and you haven't yet been introduced to neural networks, we'll take you through this method of technical analysis and show you how to apply it to your trading style.

Neural networks do not make any forecasts. Instead, they analyze price data and uncover opportunities. Using a neural network, you can make a trade decision based on thoroughly analyzed data, which is not necessarily the case when using traditional technical analysis methods. For a serious, thinking trader, neural networks are a next-generation tool with great potential that can detect subtle non-linear interdependencies and patterns that other methods of technical analysis are unable to uncover.

Some of the application of Neural networks are

1. Character Recognition : The idea of character recognition has become very important as handheld devices like the Palm Pilot are becoming increasingly popular. Neural networks can be used to recognize handwritten characters.

2. Image Compression – Neural networks can receive and process vast amounts of information at once, making them useful in image compression. With the Internet explosion and more sites using more images on their sites, using neural networks for image compression is worth a look.

3. Stock Market Prediction -The day-to-day business of the stock market is extremely complicated. Many factors weigh in whether a given stock will go up or down on any given day. Since neural networks can examine a lot of information quickly and sort it all out, they can be used to predict stock prices.

4. Traveling Saleman's Problem- Interestingly enough, neural networks can solve the traveling salesman problem, but only to a certain degree of approximation.

5. Medicine, Electronic Nose, Security, and Loan Applications - These are some applications that are in their proof-of-concept stage, with the acception of a neural network that will decide whether or not to grant a loan, something that has already been used more successfully than many humans.

6. Miscellaneous Applications - These are some very interesting (albeit at times a little absurd) applications of neural networks.



Author: Surya Narayana Adiga

Group : Finance 2

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