VAEs for time series

This section covers the how and why of time series VAEs and gives a couple of examples where they have been used. Time series are such a big topic in finance that Chapter 4, Understanding Time Series, is heavily focused to it.

Autoencoders have found applications in connection to time series as they are able to encode a long time series into a single, descriptive vector. This vector can then, for example, be used to efficiently compare one time series to another time series, based on specific and complex patterns that cannot be captured with a simple correlation, for instance.

Consider the 2010 "Flash Crash." On May 6, 2010, starting at 02:32, US markets saw a major loss of value. The Dow Jones Industrial Average lost about 9%, which equates to about a trillion dollars' worth of value being wiped out in a couple of minutes. 36 minutes later, the crash was over, most of the lost value was regained, and people started wondering what on earth had just happened.

Five years...