Mastering Python for Finance - Second Edition

The genetic algorithm

The Genetic Algorithm (GA) is a technique where every individual evolves through the process of natural selection in order to optimize a problem. A population of candidate solutions in an optimization problem goes through an iterative process of selection to become parents, undergoing mutation and crossover to produce the next generation of offspring. Over cycles of successive generations, the population evolves toward an optimal solution.

The application of GAs can be applied to a variety of optimizing problems, including backtesting, and is especially useful for solving standard optimizations, discontinuous or non-differentiable problems, or nonlinear outcomes.