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research article

Machine learning with kernels for portfolio valuation and risk management

Boudabsa, Lotfi  
•
Filipovic, Damir  
November 22, 2021
Finance And Stochastics

We introduce a simulation method for dynamic portfolio valuation and risk management building on machine learning with kernels. We learn the dynamic value process of a portfolio from a finite sample of its cumulative cash flow. The learned value process is given in closed form thanks to a suitable choice of the kernel. We show asymptotic consistency and derive finite-sample error bounds under conditions that are suitable for finance applications. Numerical experiments show good results in large dimensions for a moderate training sample size.

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Type
research article
DOI
10.1007/s00780-021-00465-4
Web of Science ID

WOS:000721391100001

Author(s)
Boudabsa, Lotfi  
Filipovic, Damir  
Date Issued

2021-11-22

Publisher

SPRINGER HEIDELBERG

Published in
Finance And Stochastics
Volume

26

Start page

131

End page

172

Subjects

Business, Finance

•

Mathematics, Interdisciplinary Applications

•

Social Sciences, Mathematical Methods

•

Statistics & Probability

•

Business & Economics

•

Mathematics

•

Mathematical Methods In Social Sciences

•

dynamic portfolio valuation

•

kernel ridge regression

•

learning theory

•

reproducing kernel hilbert space

•

portfolio risk management

•

replicating portfolio

•

theorem

•

space

•

rates

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
CSF  
SFI-GE  
Available on Infoscience
December 4, 2021
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/183522
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