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Quantitative Finance · Glossary

What is Nested cross-validation?

Definition 3.3 Machine Learning for Markets · Chapter 3 — Validation

Nested cross-validation runs an inner cross-validation inside each training set of an outer one: the inner folds choose the hyperparameters, the configuration so chosen is refitted on the outer training set and scored on the outer test fold. The mean outer score assesses the whole procedure, selection included.

Thirty seeds of the same boosted trees on a world with nothing to predict: the score on the months used to choose among them against the score on months nobody looked at. The run chosen for its selection score (circled) is ordinary afterwards. Data: ml_validation.selection.
Figure 3.2. Thirty seeds of the same boosted trees on a world with nothing to predict: the score on the months used to choose among them against the score on months nobody looked at. The run chosen for its selection score (circled) is ordinary afterwards. Data: ml_validation.selection.
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