• Title/Summary/Keyword: Portfolio optimization

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Hierarchical Risk Parity Portfolio Optimization via Nonlinear Measures Considering Finite Size Effects (유한 크기 효과를 고려한 비선형 의존성 지표를 활용한 계층적 리스크 패리티 모형 기반 포트폴리오 최적화 )

  • Insu Choi;Woo Chang Kim
    • Proceedings of the Korea Information Processing Society Conference
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    • 2023.11a
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    • pp.8-10
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    • 2023
  • 본 연구는 계층적 리스크 패리티 (Hierarchical Risk Parity, HRP) 포트폴리오 방법론과 정규화된 상호 정보 거리의 결합을 연구하였다. 이때, 한정된 이동창에서 발생할 수 있는 유한 크기 효과(finite size effects) 문제를 극복하기 위해 무작위로 섞인 NID 값에 대한 평균치를 제공함에 따라 NID 를 활용한 새로운 포트폴리오 최적화 방법을 제안한다. 본 연구의 결과는 NID 를 통합한 HRP 포트폴리오가 기존 방법론에 비해 통계적 장점과 함께 더욱 효율적이며 안정적임을 보여준다.

A Study on Risk Parity Asset Allocation Model with XGBoos (XGBoost를 활용한 리스크패리티 자산배분 모형에 관한 연구)

  • Kim, Younghoon;Choi, HeungSik;Kim, SunWoong
    • Journal of Intelligence and Information Systems
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    • v.26 no.1
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    • pp.135-149
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    • 2020
  • Artificial intelligences are changing world. Financial market is also not an exception. Robo-Advisor is actively being developed, making up the weakness of traditional asset allocation methods and replacing the parts that are difficult for the traditional methods. It makes automated investment decisions with artificial intelligence algorithms and is used with various asset allocation models such as mean-variance model, Black-Litterman model and risk parity model. Risk parity model is a typical risk-based asset allocation model which is focused on the volatility of assets. It avoids investment risk structurally. So it has stability in the management of large size fund and it has been widely used in financial field. XGBoost model is a parallel tree-boosting method. It is an optimized gradient boosting model designed to be highly efficient and flexible. It not only makes billions of examples in limited memory environments but is also very fast to learn compared to traditional boosting methods. It is frequently used in various fields of data analysis and has a lot of advantages. So in this study, we propose a new asset allocation model that combines risk parity model and XGBoost machine learning model. This model uses XGBoost to predict the risk of assets and applies the predictive risk to the process of covariance estimation. There are estimated errors between the estimation period and the actual investment period because the optimized asset allocation model estimates the proportion of investments based on historical data. these estimated errors adversely affect the optimized portfolio performance. This study aims to improve the stability and portfolio performance of the model by predicting the volatility of the next investment period and reducing estimated errors of optimized asset allocation model. As a result, it narrows the gap between theory and practice and proposes a more advanced asset allocation model. In this study, we used the Korean stock market price data for a total of 17 years from 2003 to 2019 for the empirical test of the suggested model. The data sets are specifically composed of energy, finance, IT, industrial, material, telecommunication, utility, consumer, health care and staple sectors. We accumulated the value of prediction using moving-window method by 1,000 in-sample and 20 out-of-sample, so we produced a total of 154 rebalancing back-testing results. We analyzed portfolio performance in terms of cumulative rate of return and got a lot of sample data because of long period results. Comparing with traditional risk parity model, this experiment recorded improvements in both cumulative yield and reduction of estimated errors. The total cumulative return is 45.748%, about 5% higher than that of risk parity model and also the estimated errors are reduced in 9 out of 10 industry sectors. The reduction of estimated errors increases stability of the model and makes it easy to apply in practical investment. The results of the experiment showed improvement of portfolio performance by reducing the estimated errors of the optimized asset allocation model. Many financial models and asset allocation models are limited in practical investment because of the most fundamental question of whether the past characteristics of assets will continue into the future in the changing financial market. However, this study not only takes advantage of traditional asset allocation models, but also supplements the limitations of traditional methods and increases stability by predicting the risks of assets with the latest algorithm. There are various studies on parametric estimation methods to reduce the estimated errors in the portfolio optimization. We also suggested a new method to reduce estimated errors in optimized asset allocation model using machine learning. So this study is meaningful in that it proposes an advanced artificial intelligence asset allocation model for the fast-developing financial markets.

Design for Landfill Gas Application by Low Calorific Gas Turbine and Green House Optimization Technology (Low Calorific Gasturbine 매립지 적용 및 유리온실 운용기술 설계)

  • Hur, Kwang-Beom;Park, Jung-Keuk;Lee, Jung-Bin;Rhim, Sang-Gyu
    • 한국신재생에너지학회:학술대회논문집
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    • 2010.06a
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    • pp.244.1-244.1
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    • 2010
  • Bio energy development by using Low Calorific Gas Turbine(LCGT) has been developed for New & Renewable energy source for next generation power system, low fuel and operating cost method by using the renewable energy source in landfill gas (LFG), Food Waste, water waste and Livestock biogas. Low calorific fuel purification by pretreatment system and carbon dioxide fixation by green house system are very important design target for evaluate optimum applications for bio energy. Main problems and accidents of Low Calorific Gas Turbine system was derived from bio fuel condition such as hydro sulfide concentration, siloxane level, moisture concentration and so on. Even if the quality of the bio fuel is not better than natural gas, LCGT system has the various fuel range and environmental friendly power system. The mechanical characterisitics of LCGT system is a high total efficiency (>70%), wide range of output power (30kW - 30MW class) and very clean emmission from power system (low NOx). Also, we can use co-generation system. A green house designed for four different carbon dioxide concentration from ambient air to 2000 ppm by utilizing the exhaust gas and hot water from LCGT system. We look forward to contribute the policy for Renewable Portfolio Standards(RPS) by using LCGT power system.

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Development of a Stock Trading System Using M & W Wave Patterns and Genetic Algorithms (M&W 파동 패턴과 유전자 알고리즘을 이용한 주식 매매 시스템 개발)

  • Yang, Hoonseok;Kim, Sunwoong;Choi, Heung Sik
    • Journal of Intelligence and Information Systems
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    • v.25 no.1
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    • pp.63-83
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    • 2019
  • Investors prefer to look for trading points based on the graph shown in the chart rather than complex analysis, such as corporate intrinsic value analysis and technical auxiliary index analysis. However, the pattern analysis technique is difficult and computerized less than the needs of users. In recent years, there have been many cases of studying stock price patterns using various machine learning techniques including neural networks in the field of artificial intelligence(AI). In particular, the development of IT technology has made it easier to analyze a huge number of chart data to find patterns that can predict stock prices. Although short-term forecasting power of prices has increased in terms of performance so far, long-term forecasting power is limited and is used in short-term trading rather than long-term investment. Other studies have focused on mechanically and accurately identifying patterns that were not recognized by past technology, but it can be vulnerable in practical areas because it is a separate matter whether the patterns found are suitable for trading. When they find a meaningful pattern, they find a point that matches the pattern. They then measure their performance after n days, assuming that they have bought at that point in time. Since this approach is to calculate virtual revenues, there can be many disparities with reality. The existing research method tries to find a pattern with stock price prediction power, but this study proposes to define the patterns first and to trade when the pattern with high success probability appears. The M & W wave pattern published by Merrill(1980) is simple because we can distinguish it by five turning points. Despite the report that some patterns have price predictability, there were no performance reports used in the actual market. The simplicity of a pattern consisting of five turning points has the advantage of reducing the cost of increasing pattern recognition accuracy. In this study, 16 patterns of up conversion and 16 patterns of down conversion are reclassified into ten groups so that they can be easily implemented by the system. Only one pattern with high success rate per group is selected for trading. Patterns that had a high probability of success in the past are likely to succeed in the future. So we trade when such a pattern occurs. It is a real situation because it is measured assuming that both the buy and sell have been executed. We tested three ways to calculate the turning point. The first method, the minimum change rate zig-zag method, removes price movements below a certain percentage and calculates the vertex. In the second method, high-low line zig-zag, the high price that meets the n-day high price line is calculated at the peak price, and the low price that meets the n-day low price line is calculated at the valley price. In the third method, the swing wave method, the high price in the center higher than n high prices on the left and right is calculated as the peak price. If the central low price is lower than the n low price on the left and right, it is calculated as valley price. The swing wave method was superior to the other methods in the test results. It is interpreted that the transaction after checking the completion of the pattern is more effective than the transaction in the unfinished state of the pattern. Genetic algorithms(GA) were the most suitable solution, although it was virtually impossible to find patterns with high success rates because the number of cases was too large in this simulation. We also performed the simulation using the Walk-forward Analysis(WFA) method, which tests the test section and the application section separately. So we were able to respond appropriately to market changes. In this study, we optimize the stock portfolio because there is a risk of over-optimized if we implement the variable optimality for each individual stock. Therefore, we selected the number of constituent stocks as 20 to increase the effect of diversified investment while avoiding optimization. We tested the KOSPI market by dividing it into six categories. In the results, the portfolio of small cap stock was the most successful and the high vol stock portfolio was the second best. This shows that patterns need to have some price volatility in order for patterns to be shaped, but volatility is not the best.

A Case Study on the Paradigm Shift to Digital Logistics Platform : The Case of Maersk

  • So Hyung KIM
    • Journal of Distribution Science
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    • v.22 no.4
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    • pp.105-114
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    • 2024
  • Purpose : Due to the uncertainty of the global trade environment and the trade downturn, the shipping industry continues to face challenges. This study aims to investigate in-depth analysis of crisis overcoming strategies through case study of a company that is leader in the shipping and logistics industry. Research Desigh and Methodology : In order to conduct an in-depth analysis, a single case analysis was selected as a qualitative study. For this purpose, various secondary sources were used, and indirect interview data were also used. In this study, Maersk was selected because it has grown from a traditional shipping logistics company to a digital platform company. Results: Maersk has transformed itself into a comprehensive, digital logistics platform with several key strategies to respond to the long-term slump in the shipping industry. First, it leveraged Maersk's diversification and portfolio optimization strategy. Second, Maersk is transforming its logistics and transport processes through digitalization and technological innovation. Conclusion: Maersk, which is responding to the long-term recession facing the shipping industry, looked at how it has leveraged its strengths and explored new opportunities through a number of strategies and changes. This study provides insight into a digital logistics platform that will benefit the other companies as well.

Study on Effective 5G Network Deployment Method for 5G Mobile Communication Services (5G 이동통신 서비스를 위한 효율적인 5G 망구축 방안에 관한 연구)

  • CHUNG, Woo-Ghee
    • The Journal of Korean Institute of Electromagnetic Engineering and Science
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    • v.29 no.5
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    • pp.353-358
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    • 2018
  • We herein analyze the service traffic characteristics and spectrum of the 5G mobile communication and suggest the effective 5G network deployment method for 5G mobile communication services. The data rates of the 5G mobile communication are from several kbps (voice and IoT) up to 1 Gbps (hologram, among others). The 5G mobile communication services show the diverse cell coverage environments owing to the use of diverse service data rates and multiple spectrum bands. To effectively support the 5G mobile communication services, the network deployment requires the optimization of the service coverages for new service environments and multiple spectrum bands. Considering the 5G spectrum bandwidth debated at present, if the 5G services of 100 Mbps can be supported in the 200 m cell edge using the 3.5 GHz spectrum bands, the 5G services of the 1 Gbps hologram and 500-Mbps 4k UHD can be supported in the cell edges of 50 m and 100 m using the 28 GHz spectrum bands. Therefore, the 5G services can be supported effectively by the 5G network deployment using spectrum portfolio configurations to match the diverse 5G services and multiple bands.

Multi-objective Genetic Algorithm for Variable Selection in Linear Regression Model and Application (선형회귀모델의 변수선택을 위한 다중목적 유전 알고리즘과 응용)

  • Kim, Dong-Il;Park, Cheong-Sool;Baek, Jun-Geol;Kim, Sung-Shick
    • Journal of the Korea Society for Simulation
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    • v.18 no.4
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    • pp.137-148
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    • 2009
  • The purpose of this study is to implement variable selection algorithm which helps construct a reliable linear regression model. If we use all candidate variables to construct a linear regression model, the significance of the model will be decreased and it will cause 'Curse of Dimensionality'. And if the number of data is less than the number of variables (dimension), we cannot construct the regression model. Due to these problems, we consider the variable selection problem as a combinatorial optimization problem, and apply GA (Genetic Algorithm) to the problem. Typical measures of estimating statistical significance are $R^2$, F-value of regression model, t-value of regression coefficients, and standard error of estimates. We design GA to solve multi-objective functions, because statistical significance of model is not to be estimated by a single measure. We perform experiments using simulation data, designed to consider various kinds of situations. As a result, it shows better performance than LARS (Least Angle Regression) which is an algorithm to solve variable selection problems. We modify algorithm to solve portfolio selection problem which construct portfolio by selecting stocks. We conclude that the algorithm is able to solve real problems.

A Model for Supporting Information Security Investment Decision-Making Considering the Efficacy of Countermeasures (정보보호 대책의 효과성을 고려한 정보보호 투자 의사결정 지원 모형)

  • Byeongjo Park;Tae-Sung Kim
    • Information Systems Review
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    • v.25 no.4
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    • pp.27-45
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    • 2023
  • The importance of information security has grown alongside the development of information and communication technology. However, companies struggle to select suitable countermeasures within their limited budgets. Sönmez and Kılıç (2021) proposed a model using AHP and mixed integer programming to determine the optimal investment combination for mitigating information security breaches. However, their model had limitations: 1) a lack of objective measurement for countermeasure efficacy against security threats, 2) unrealistic scenarios where risk reduction surpassed pre-investment levels, and 3) cost duplication when using a single countermeasure for multiple threats. This paper enhances the model by objectively quantifying countermeasure efficacy using the beta probability distribution. It also resolves unrealistic scenarios and the issue of duplicating investments for a single countermeasure. An empirical analysis was conducted on domestic SMEs to determine investment budgets and risk levels. The improved model outperformed Sönmez and Kılıç's (2021) optimization model. By employing the proposed effectiveness measurement approach, difficulty to evaluate countermeasures can be quantified. Utilizing the improved optimization model allows for deriving an optimal investment portfolio for each countermeasure within a fixed budget, considering information security costs, quantities, and effectiveness. This aids in securing the information security budget and effectively addressing information security threats.

A Study on the Prediction Model of Stock Price Index Trend based on GA-MSVM that Simultaneously Optimizes Feature and Instance Selection (입력변수 및 학습사례 선정을 동시에 최적화하는 GA-MSVM 기반 주가지수 추세 예측 모형에 관한 연구)

  • Lee, Jong-sik;Ahn, Hyunchul
    • Journal of Intelligence and Information Systems
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    • v.23 no.4
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    • pp.147-168
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    • 2017
  • There have been many studies on accurate stock market forecasting in academia for a long time, and now there are also various forecasting models using various techniques. Recently, many attempts have been made to predict the stock index using various machine learning methods including Deep Learning. Although the fundamental analysis and the technical analysis method are used for the analysis of the traditional stock investment transaction, the technical analysis method is more useful for the application of the short-term transaction prediction or statistical and mathematical techniques. Most of the studies that have been conducted using these technical indicators have studied the model of predicting stock prices by binary classification - rising or falling - of stock market fluctuations in the future market (usually next trading day). However, it is also true that this binary classification has many unfavorable aspects in predicting trends, identifying trading signals, or signaling portfolio rebalancing. In this study, we try to predict the stock index by expanding the stock index trend (upward trend, boxed, downward trend) to the multiple classification system in the existing binary index method. In order to solve this multi-classification problem, a technique such as Multinomial Logistic Regression Analysis (MLOGIT), Multiple Discriminant Analysis (MDA) or Artificial Neural Networks (ANN) we propose an optimization model using Genetic Algorithm as a wrapper for improving the performance of this model using Multi-classification Support Vector Machines (MSVM), which has proved to be superior in prediction performance. In particular, the proposed model named GA-MSVM is designed to maximize model performance by optimizing not only the kernel function parameters of MSVM, but also the optimal selection of input variables (feature selection) as well as instance selection. In order to verify the performance of the proposed model, we applied the proposed method to the real data. The results show that the proposed method is more effective than the conventional multivariate SVM, which has been known to show the best prediction performance up to now, as well as existing artificial intelligence / data mining techniques such as MDA, MLOGIT, CBR, and it is confirmed that the prediction performance is better than this. Especially, it has been confirmed that the 'instance selection' plays a very important role in predicting the stock index trend, and it is confirmed that the improvement effect of the model is more important than other factors. To verify the usefulness of GA-MSVM, we applied it to Korea's real KOSPI200 stock index trend forecast. Our research is primarily aimed at predicting trend segments to capture signal acquisition or short-term trend transition points. The experimental data set includes technical indicators such as the price and volatility index (2004 ~ 2017) and macroeconomic data (interest rate, exchange rate, S&P 500, etc.) of KOSPI200 stock index in Korea. Using a variety of statistical methods including one-way ANOVA and stepwise MDA, 15 indicators were selected as candidate independent variables. The dependent variable, trend classification, was classified into three states: 1 (upward trend), 0 (boxed), and -1 (downward trend). 70% of the total data for each class was used for training and the remaining 30% was used for verifying. To verify the performance of the proposed model, several comparative model experiments such as MDA, MLOGIT, CBR, ANN and MSVM were conducted. MSVM has adopted the One-Against-One (OAO) approach, which is known as the most accurate approach among the various MSVM approaches. Although there are some limitations, the final experimental results demonstrate that the proposed model, GA-MSVM, performs at a significantly higher level than all comparative models.

Estimation of GARCH Models and Performance Analysis of Volatility Trading System using Support Vector Regression (Support Vector Regression을 이용한 GARCH 모형의 추정과 투자전략의 성과분석)

  • Kim, Sun Woong;Choi, Heung Sik
    • Journal of Intelligence and Information Systems
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    • v.23 no.2
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    • pp.107-122
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    • 2017
  • Volatility in the stock market returns is a measure of investment risk. It plays a central role in portfolio optimization, asset pricing and risk management as well as most theoretical financial models. Engle(1982) presented a pioneering paper on the stock market volatility that explains the time-variant characteristics embedded in the stock market return volatility. His model, Autoregressive Conditional Heteroscedasticity (ARCH), was generalized by Bollerslev(1986) as GARCH models. Empirical studies have shown that GARCH models describes well the fat-tailed return distributions and volatility clustering phenomenon appearing in stock prices. The parameters of the GARCH models are generally estimated by the maximum likelihood estimation (MLE) based on the standard normal density. But, since 1987 Black Monday, the stock market prices have become very complex and shown a lot of noisy terms. Recent studies start to apply artificial intelligent approach in estimating the GARCH parameters as a substitute for the MLE. The paper presents SVR-based GARCH process and compares with MLE-based GARCH process to estimate the parameters of GARCH models which are known to well forecast stock market volatility. Kernel functions used in SVR estimation process are linear, polynomial and radial. We analyzed the suggested models with KOSPI 200 Index. This index is constituted by 200 blue chip stocks listed in the Korea Exchange. We sampled KOSPI 200 daily closing values from 2010 to 2015. Sample observations are 1487 days. We used 1187 days to train the suggested GARCH models and the remaining 300 days were used as testing data. First, symmetric and asymmetric GARCH models are estimated by MLE. We forecasted KOSPI 200 Index return volatility and the statistical metric MSE shows better results for the asymmetric GARCH models such as E-GARCH or GJR-GARCH. This is consistent with the documented non-normal return distribution characteristics with fat-tail and leptokurtosis. Compared with MLE estimation process, SVR-based GARCH models outperform the MLE methodology in KOSPI 200 Index return volatility forecasting. Polynomial kernel function shows exceptionally lower forecasting accuracy. We suggested Intelligent Volatility Trading System (IVTS) that utilizes the forecasted volatility results. IVTS entry rules are as follows. If forecasted tomorrow volatility will increase then buy volatility today. If forecasted tomorrow volatility will decrease then sell volatility today. If forecasted volatility direction does not change we hold the existing buy or sell positions. IVTS is assumed to buy and sell historical volatility values. This is somewhat unreal because we cannot trade historical volatility values themselves. But our simulation results are meaningful since the Korea Exchange introduced volatility futures contract that traders can trade since November 2014. The trading systems with SVR-based GARCH models show higher returns than MLE-based GARCH in the testing period. And trading profitable percentages of MLE-based GARCH IVTS models range from 47.5% to 50.0%, trading profitable percentages of SVR-based GARCH IVTS models range from 51.8% to 59.7%. MLE-based symmetric S-GARCH shows +150.2% return and SVR-based symmetric S-GARCH shows +526.4% return. MLE-based asymmetric E-GARCH shows -72% return and SVR-based asymmetric E-GARCH shows +245.6% return. MLE-based asymmetric GJR-GARCH shows -98.7% return and SVR-based asymmetric GJR-GARCH shows +126.3% return. Linear kernel function shows higher trading returns than radial kernel function. Best performance of SVR-based IVTS is +526.4% and that of MLE-based IVTS is +150.2%. SVR-based GARCH IVTS shows higher trading frequency. This study has some limitations. Our models are solely based on SVR. Other artificial intelligence models are needed to search for better performance. We do not consider costs incurred in the trading process including brokerage commissions and slippage costs. IVTS trading performance is unreal since we use historical volatility values as trading objects. The exact forecasting of stock market volatility is essential in the real trading as well as asset pricing models. Further studies on other machine learning-based GARCH models can give better information for the stock market investors.