Search results

This paper aims to empirically test, from a regulatory portfolio management standpoint, the application of liquidity-adjusted risk techniques in the process of getting optimum and investable economic-capital structures in the Gulf Cooperation Council financial markets, subject to applying various operational and financial optimization restrictions under crisis outlooks.

The author implements a robust methodology to assess regulatory economic-capital allocation in a liquidity-adjusted value at risk (LVaR) context, mostly from the standpoint of investable portfolios analytics that have long- and short-sales asset allocation or for those portfolios that contain long-only asset allocation. The optimization route is accomplished by controlling the nonlinear quadratic objective risk function with certain regulatory constraints along with LVaR-GARCH-M (1,1) procedure to forecast conditional risk parameters and expected returns for multiple asset classes.

The author’s conclusions emphasize that the attained investable economic-capital portfolios lie-off the efficient frontier, yet those long-only portfolios seem to lie near the efficient frontier than portfolios with long- and short-sales assets allocation. In effect, the newly observed market microstructures forms and derived deductions were not apparent in prior research studies (Al Janabi, 2013).

The attained empirical results are quite interesting for practical portfolio optimization, within the environments of big data analytics, reinforcement machine learning, expert systems and smart financial applications. Furthermore, it is quite promising for multiple-asset portfolio management techniques, performance measurement and improvement analytics, reinforcement machine learning and operations research algorithms in financial institutions operations, above all after the consequences of the 2007–2009 financial crisis.

While this paper builds on Al Janabi’s (2013) optimization algorithms and modeling techniques, it varies in the sense that it covers the outcomes of a multi-asset portfolio optimization method under severe event market scenarios and by allowing for both long-only and combinations of long-/short-sales multiple asset. The achieved empirical results, optimization parameters and efficient and investable economic-capital figures were not apparent in Al Janabi’s (2013) paper because the prior evaluation were performed under normal market circumstances and without bearing in mind the impacts of the 2007–2009 global financial crunch.

This study aims to examine the theoretical foundations for multivariate portfolio optimization algorithms under illiquid market conditions. In this study, special emphasis is devoted to the application of a risk-engine, which is based on the contemporary concept of liquidity-adjusted value-at-risk (LVaR), to multivariate optimization of investment portfolios.

This paper examines the modeling parameters of LVaR technique under event market settings and discusses how to integrate asset liquidity risk into LVaR models. Finally, the authors discuss scenario optimization algorithms for the assessment of structured investment portfolios and present a detailed operational methodology for computer programming purposes and prospective research design with the backing of a graphical flowchart.

To that end, the portfolio/risk manager can specify different closeout horizons and dependence measures and calculate the necessary LVaR and resulting investable portfolios. In addition, portfolio managers can compare the return/risk ratio and asset allocation of obtained investable portfolios with different liquidation horizons in relation to the conventional Markowitz´s mean-variance approach.

The examined optimization algorithms and modeling techniques have important practical applications for portfolio management and risk assessment, and can have many uses within machine learning and artificial intelligence, expert systems and smart financial applications, financial technology (FinTech), and within big data environments. In addition, it provide key real-world implications for portfolio/risk managers, treasury directors, risk management executives, policymakers and financial regulators to comply with the requirements of Basel III best practices on liquidly risk.

The proposed optimization algorithms can aid in advancing portfolios selection and management in financial markets by assessing investable portfolios subject to meaningful operational and financial constraints. Furthermore, the robust risk-algorithms and portfolio optimization techniques can aid in solving some real-world dilemmas under stressed and adverse market conditions, such as the effect of liquidity when it dries up in financial and commodity markets, the impact of correlations factors when there is a switching in their signs and the integration of the influence of the nonlinear and non-normal distribution of assets’ returns in portfolio optimization and management.

The purpose of this study is to provide a novel portfolio asset prediction by means of the modified deep learning and hybrid meta-heuristic concept. In the past few years, portfolio optimization has appeared as a demanding and fascinating multi-objective problem, in the area of computational finance. Yet, it is accepting the growing attention of fund management companies, researchers and individual investors. The primary issues in portfolio selection are the choice of a subset of assets and its related optimal weights of every chosen asset. The composition of every asset is chosen in a manner such that the total profit or return of the portfolio is improved thereby reducing the risk at the same time.

This paper provides a novel portfolio asset prediction using the modified deep learning concept. For implementing this framework, a set of data involving the portfolio details of different companies for certain duration is selected. The proposed model involves two main phases. One is to predict the future state or profit of every company, and the other is to select the company which is giving maximum profit in the future. In the first phase, a deep learning model called recurrent neural network (RNN) is used for predicting the future condition of the entire companies taken in the data set and thus creates the data library. Once the forecasting of the data is done, the selection of companies for the portfolio is done using a hybrid optimization algorithm by integrating Jaya algorithm (JA) and spotted hyena optimization (SHO) termed as Jaya-based spotted hyena optimization (J-SHO). This optimization model tries to get the optimal solution including which company has to be selected, and optimized RNN helps to predict the future return while using those companies. The main objective model of the J-SHO-based RNN is to maximize the prediction accuracy and J-SHO-based portfolio asset selection is to maximize the profit. Extensive experiments on the benchmark datasets from real-world stock markets with diverse assets in various time periods shows that the developed model outperforms other state-of-the-art strategies proving its efficiency in portfolio optimization.

From the analysis, the profit analysis of proposed J-SHO for predicting after 7 days in next month was 46.15% better than particle swarm optimization (PSO), 18.75% better than grey wolf optimization (GWO), 35.71% better than whale optimization algorithm (WOA), 5.56% superior to JA and 35.71% superior to SHO. Therefore, it can be certified that the proposed J-SHO was effective in providing intelligent portfolio asset selection and prediction when compared with the conventional methods.

This paper presents a technique for providing a novel portfolio asset prediction using J-SHO algorithm. This is the first work uses J-SHO-based optimization for providing a novel portfolio asset prediction using the modified deep learning concept.

This paper aims to examine from commodity portfolio managers’ perspective the performance of liquidity adjusted risk modeling in assessing the market risk parameters of a large commodity portfolio and in obtaining efficient and coherent portfolios under different market circumstances.

The implemented market risk modeling algorithm and investment portfolio analytics using reinforcement machine learning techniques can simultaneously handle risk-return characteristics of commodity investments under regular and crisis market settings besides considering the particular effects of the time-varying liquidity constraints of the multiple-asset commodity portfolios.

In particular, the paper implements a robust machine learning method to commodity optimal portfolio selection and within a liquidity-adjusted value-at-risk (LVaR) framework. In addition, the paper explains how the adapted LVaR modeling algorithms can be used by a commodity trading unit in a dynamic asset allocation framework for estimating risk exposure, assessing risk reduction alternates and creating efficient and coherent market portfolios.

The optimization parameters subject to meaningful operational and financial constraints, investment portfolio analytics and empirical results can have important practical uses and applications for commodity portfolio managers particularly in the wake of the 2007–2009 global financial crisis. In addition, the recommended reinforcement machine learning optimization algorithms can aid in solving some real-world dilemmas under stressed and adverse market conditions (e.g. illiquidity, switching in correlations factors signs, nonlinear and non-normal distribution of assets’ returns) and can have key applications in machine learning, expert systems, smart financial functions, internet of things (IoT) and financial technology (FinTech) in big data ecosystems.

This paper aims to propose an improved version of portfolio optimization model through the prediction of the future behavior of stock returns using a combined wavelet-based long short-term memory (LSTM).

First, data are gathered and divided into two parts, namely, “past data” and “real data.” In the second stage, the wavelet transform is proposed to decompose the stock closing price time series into a set of coefficients. The derived coefficients are taken as an input to the LSTM model to predict the stock closing price time series and the “future data” is created. In the third stage, the mean-variance portfolio optimization problem (MVPOP) has iteratively been run using the “past,” “future” and “real” data sets. The epsilon-constraint method is adapted to generate the Pareto front for all three runes of MVPOP.

The real daily stock closing price time series of six stocks from the FTSE 100 between January 1, 2000, and December 30, 2020, is used to check the applicability and efficacy of the proposed approach. The comparisons of “future,” “past” and “real” Pareto fronts showed that the “future” Pareto front is closer to the “real” Pareto front. This demonstrates the efficacy and applicability of proposed approach.

Most of the classic Markowitz-based portfolio optimization models used past information to estimate the associated parameters of the stocks. This study revealed that the prediction of the future behavior of stock returns using a combined wavelet-based LSTM improved the performance of the portfolio.

The purpose of this paper is to compare the risk and return characteristics as well as the allocation of mean‐variance (MV) and downside risk (DR) optimized portfolios of international real estate stock markets and to discuss implications for portfolio management.

The analysis focuses on real estate markets only and examines the appropriateness of the Markowitz approach based on MV optimization in comparison to the DR framework suggested by Estrada. Therefore, the two frameworks are presented before the properties of the return distributions are analyzed. Afterwards, the risk and return characteristics as well as the allocation of the efficient portfolios in both frameworks and the divergences are analyzed.

Because of non‐normally distributed returns, negative skewness, and probably non‐quadratic utility functions of investors, MV optimization is not appropriate and the alternative approach by Estrada has its merit compared with other DR frameworks. Furthermore, MV‐efficient and DR‐efficient portfolio allocation differ, as shown by a similarity index. Summarizing, MV optimization is inherent with misleading results and DR optimization shows stronger out‐of‐sample performance – at least during time periods characterized by high market volatility and financial market turmoil.

This study provides some interesting and valuable insights into the DR of international securitized real estate portfolios and the limitations for portfolio management based on MV optimization.

Optimum utilization of investments has always been considered one of the most crucial aspects of capital markets. Investment into various securities is the subject of portfolio optimization intent to maximize return at minimum risk. In this series, a population-based evolutionary approach, stochastic fractal search (SFS), is derived from the natural growth phenomenon. This study aims to develop portfolio selection model using SFS approach to construct an efficient portfolio by optimizing the Sharpe ratio with risk budgeting constraints.

This paper proposes a constrained portfolio optimization model using the SFS approach with risk-budgeting constraints. SFS is an evolutionary method inspired by the natural growth process which has been modeled using the fractal theory. Experimental analysis has been conducted to determine the effectiveness of the proposed model by making comparisons with state-of-the-art from domain such as genetic algorithm, particle swarm optimization, simulated annealing and differential evolution. The real datasets of the Indian stock exchanges and datasets of global stock exchanges such as Nikkei 225, DAX 100, FTSE 100, Hang Seng31 and S&P 100 have been taken in the study.

The study confirms the better performance of the SFS model among its peers. Also, statistical analysis has been done using SPSS 20 to confirm the hypothesis developed in the experimental analysis.

In the recent past, researchers have already proposed a significant number of models to solve portfolio selection problems using the meta-heuristic approach. However, this is the first attempt to apply the SFS optimization approach to the problem.

Optimization of energy planning for growth and sustainable development has become very important in the context of climate change mitigation imperatives in developing countries. Existing models do not capture developing country realities adequately. The purpose of this paper is to conceptualizes a framework for energy strategy optimization of the Indian energy sector, which can be applied in all emerging economies.

Hierarchical multi‐objective policy optimization methodology adopts a policy‐centric approach and groups the energy strategies into multi‐level portfolios based on convergence of objectives appropriate to each level. This arrangement facilitates application of the optimality principle of dynamic programming. Synchronised optimization of strategies with respect to the common objectives at each level results in optimal policy portfolios.

The reductionist policy‐centric approach to complex energy economy modelling, facilitated by the dynamic programming methodology, is most suitable for policy optimization in the context of a developing country. Barriers to project implementation and cost risks are critical features of developing countries which are captured in the framework in the form of a comprehensive risk barrier index. Genetic algorithms are suitable for optimization of the first level objectives, while the efficiency approach, using restricted weight stochastic data envelopment analysis, is appropriate for higher levels of the objective hierarchy.

The methodology has been designed for application to the energy sector planning for India's 12th Five Year Plan for which the objectives of faster growth, better inclusion, energy security and sustainability have been identified. The conceptual framework combines, within the policy domain, the bottom‐up and top‐down processes to form a hybrid modelling approach yielding optimal outcomes, transparent and convincing to the policy makers. The research findings have substantial implications for transition management to a sustainable energy framework.

The methodology is general in nature and can be employed in all sectors of the economy. It is especially suited to policy design in developing countries with the ground realities factored into the model as project barriers. It offers modularity and flexibility in implementation and can accommodate all the key strategies from diverse sectors along with multiple objectives in the policy optimization process. It enables adoption of an evidence‐based and transparent approach to policy making. The research findings have substantial value for transition management to a sustainable energy framework in developing countries.

It is crucial to find a better portfolio optimization strategy, considering the cryptocurrencies' asymmetric volatilities. Hence, this research aimed to present dynamic optimization on minimum variance (MVP), equal risk contribution (ERC) and most diversified portfolio (MDP).

This study applied dynamic covariances from multivariate GARCH(1,1) with Student’s-t-distribution. This research also constructed static optimization from the conventional MVP, ERC and MDP as comparison. Moreover, the optimization involved transaction cost and out-of-sample analysis from the rolling windows method. The sample consisted of ten significant cryptocurrencies.

Dynamic optimization enhanced risk-adjusted return. Moreover, dynamic MDP and ERC could win the naïve strategy (1/N) under various estimation windows, and forecast lengths when the transaction cost ranging from 10 bps to 50 bps. The researcher also used another researcher's sample as a robustness test. Findings showed that dynamic optimization (MDP and ERC) outperformed the benchmark.

Sophisticated investors may use the dynamic ERC and MDP to optimize cryptocurrencies portfolio.

To the best of the author’s knowledge, this is the first paper that studies the dynamic optimization on MVP, ERC and MDP using DCC and ADCC-GARCH with multivariate-t-distribution and rolling windows method.

The optimization of investment portfolios is a topic of major importance in financial decision making, with many relevant models available in the relevant literature. The purpose of this paper is to perform a thorough comparative assessment of different bi-objective models as well as multi-objective one, in terms of the performance and robustness of the whole set of Pareto optimal portfolios.

In this study, three bi-objective models are considered (mean-variance (MV), mean absolute deviation, conditional value-at-risk (CVaR)), as well as a multi-objective model. An extensive comparison is performed using data from the Standard and Poor’s 500 index, over the period 2005–2016, through a rolling-window testing scheme. The results are analyzed using novel performance indicators representing the deviations between historical (estimated) efficient frontiers, actual out-of-sample efficient frontiers and realized out-of-sample portfolio results.

The obtained results indicate that the well-known MV model provides quite robust results compared to other bi-objective optimization models. On the other hand, the CVaR model appears to be the least robust model. The multi-objective approach offers results which are well balanced and quite competitive against simpler bi-objective models, in terms of out-of-sample performance.

This is the first comparative study of portfolio optimization models that examines the performance of the whole set of efficient portfolios, proposing analytical ways to assess their stability and robustness over time. Moreover, an extensive out-of-sample testing of a multi-objective portfolio optimization model is performed, through a rolling-window scheme, in contrast static results in prior works. The insights derived from the obtained results could be used to design improved and more robust portfolio optimization models, focusing on a multi-objective setting.