Risk management with machine-learning-based algorithms

Simon Fécamp; Joseph Mikael; Xavier Warin

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arXiv · 1902.05287

Risk management with machine-learning-based algorithms

Simon Fécamp·Joseph Mikael·Xavier Warin

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Abstract

We propose some machine-learning-based algorithms to solve hedging problems in incomplete markets. Sources of incompleteness cover illiquidity, untradable risk factors, discrete hedging dates and transaction costs. The proposed algorithms resulting strategies are compared to classical stochastic control techniques on several payoffs using a variance criterion. One of the proposed algorithm is flexible enough to be used with several existing risk criteria. We furthermore propose a new moment-based risk criteria.

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Simon Fécamp, Joseph Mikael, Xavier Warin. 2019-02-14. Risk management with machine-learning-based algorithms. https://arxiv.org/abs/1902.05287

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