Designing Object-Oriented Representations for Reasoning from First-Principles

Modeling expert knowledge using quot;situation-actionquot; rules is not always feasible in knowledgeintensive domains involving volatile knowledge (e.g., trading). The explosive searchspace involved in such domains and its dynamic nature make it extremely difficult to setupa rule base and keep it accurate. An alternative approach suggests that in some domainsmany of the rules expert use can be derived by reasoning from quot;first-principlesquot;. That approachentails modeling experts' deep knowledge, and emulating reasoning processes withdeep knowledge that allow experts to derive many of the rules they use and justify them.This paper discusses the design and implementation of an object-oriented representationfor the deep knowledge traders utilize in a business domain called hedging, which is knowledgeintensive and involves volatile knowledge. It illustrates how deep knowledge modeledusing that representation is used to support reasoning from first-principles. The paper alsoanalyzes features of that representation that we have found to be extremely beneficial inthe development of a knowledge-based system called INTELLIGENT-HEDGER. Based onour experience we feel that, with minor modifications, this representation can be used inother managerial domains involving financial reasoning