DLS • Damir Filipović • A Machine Learning Approach to Portfolio Risk Management скачать в хорошем качестве

DLS • Damir Filipović • A Machine Learning Approach to Portfolio Risk Management

Risk measurement, valuation and hedging form an integral task in portfolio risk management for insurance companies and other financial institutions. Portfolio risk arises because the values of constituent assets and liabilities change over time in response to changes in the underlying risk factors. The quantification of this risk requires modeling the dynamic portfolio value process. This boils down to compute conditional expectations of future cash flows over long time horizons, e.g., up to 40 years and beyond, which is computationally challenging. This lecture presents a framework for dynamic portfolio risk management in discrete time building on machine learning theory. We learn the replicating martingale of the portfolio from a finite sample of its terminal cumulative cash flow. The learned replicating martingale is in closed form thanks to a suitable choice of the reproducing kernel Hilbert space. We develop an asymptotic theory and prove convergence and a central limit theorem. We also derive finite sample error bounds and concentration inequalities. As application we compute the value at risk and expected shortfall of the one-year loss of some stylized portfolios. Don’t forget to Like, Subscribe and Comment! To keep up to date with events and posts follow us on:   / waterloo.math     / waterloomath     / waterloomath