A Machine Learning Approach to Portfolio Pricing and Risk Management for High-Dimensional Problems

@article{Arjona2020AML,
  title={A Machine Learning Approach to Portfolio Pricing and Risk Management for High-Dimensional Problems},
  author={Lucio Fernandez Arjona and Damir Filipovic},
  journal={Risk Management & Analysis in Financial Institutions eJournal},
  year={2020}
}
  • Lucio Fernandez Arjona, Damir Filipovic
  • Published 2020
  • Economics
  • Risk Management & Analysis in Financial Institutions eJournal
  • We present a general framework for portfolio risk management in discrete time, based on a replicating martingale. This martingale is learned from a finite sample in a supervised setting. The model learns the features necessary for an effective low-dimensional representation, overcoming the curse of dimensionality common to function approximation in high-dimensional spaces. We show results based on polynomial and neural network bases. Both offer superior results to naive Monte Carlo methods and… CONTINUE READING

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