Machine learning with kernels for portfolio valuation and risk management

Lotfi Boudabsa; Damir Filipovic

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arXiv · 1906.03726

Machine learning with kernels for portfolio valuation and risk management

Lotfi Boudabsa·Damir Filipovic

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Abstract

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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Lotfi Boudabsa, Damir Filipovic. 2019-06-09. Machine learning with kernels for portfolio valuation and risk management. https://arxiv.org/abs/1906.03726

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