Journal
NEUROCOMPUTING
Volume 498, Issue -, Pages 43-58Publisher
ELSEVIER
DOI: 10.1016/j.neucom.2022.05.036
Keywords
Black-Litterman; Portfolio management; Portfolio selection; Neural networks; Time-varying quadratic programming
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This research applies the Black-Litterman (BL) model to continuous-time portfolio optimization problem and generates investor views using a neural network. Two solvers are proposed to solve the problem and their performances are compared. The experiment results demonstrate the effectiveness of the proposed approach in different portfolio configurations.
The Black-Litterman (BL) model is a particularly essential analytical tool for effective portfolio management in financial services sector since it enables investment analysts to integrate investor views into market equilibrium returns. In this research, we define and study the continuous-time BL portfolio optimization (CTBLPO) problem as a time-varying quadratic programming (TVQP) problem. The investor's views in the CTBLPO problem are regarded as a forecasting problem, and they are generated by a novel neural network (NN) model. More precisely, employing a novel multi-function activated by a weights and-structure-determination for time-series (MAWTS) algorithm, a 3-layer feed-forward NN model, called MAWTSNN, is proposed for handling time-series modeling and forecasting problems. Then, using real-world datasets, the CTBLPO problem is approached by two different TVQP NN solvers. These solvers are the zeroing NN (ZNN) and the linear-variational-inequality primal-dual NN (LVI-PDNN). The experiment findings illustrate and compare the performances of the ZNN and LVI-PDNN in three various portfolio configurations, as well as indicating that the MAWTSNN is an excellent alternative to the traditional approaches. To promote and contend the outcomes of this research, we created two MATLAB repositories for the interested user, that are publicly accessible on GitHub.(c) 2022 Elsevier B.V. All rights reserved.
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