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2899. Recent Results in Contextual Portfolio Optimization
Invited abstract in session MD-63: Optimization Model for Novel Risks in Finance and Climate, stream OR in Banking, Finance and Insurance: New Tools for Risk Management.
Monday, 14:30-16:00Room: S14 (building: 101)
Authors (first author is the speaker)
1. | Roy Kwon
|
Mechanical and Industrial Engineering, University of Toronto | |
2. | Andrew Butler
|
ReSolve Asset Management |
Abstract
'Smart Predict and Optimize' is an emerging paradigm where the parameters and optimal solutions for an optimization problem are jointly determined. We present some recent results using this paradigm for mean-variance optimization. We show that the integrated (joint) approach can result in parameter estimations and optimal solutions that perform better out of sample than those obtained from the 'predict or estimate first, then optimize' approach. Computational challenges will be discussed which motivates the development of decomposition methods based on the alternating direction method of multipliers (ADMM) for the optimization layer in the neural network that represents the integrated approach.
Keywords
- Financial Modelling
- Machine Learning
- Optimization in Financial Mathematics
Status: accepted
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