MILLION: A General Multi-Objective Framework with Controllable Risk for Portfolio Management

Portfolio management is an important yet challenging task in AI for FinTech, which aims to allocate investors' budgets among different assets to balance the risk and return of an investment. In this study, we propose a general M ulti-object I ve framework with contro LL able r I sk for p O rtfolio ma N agement ( MILLION ), which consists of two main phases, i.e., return-related maximization and risk control. Specifically, in the return-related maximization phase, we introduce two auxiliary objectives, i.e., return rate prediction, and return rate ranking, combined with portfolio optimization to remit the overfitting problem and improve the generalization of the trained model to future markets. Subsequently, in the risk control phase, we propose two methods, i.e., portfolio interpolation and portfolio improvement, to achieve fine-grained risk control and fast risk adaption to a user-specified risk level. For the portfolio interpolation method, we theoretically prove that the risk can be perfectly controlled if the to-be-set risk level is in a proper interval. In addition, we also show that the return rate of the adjusted portfolio after portfolio interpolation is no less than that of the min-variance optimization, as long as the model in the reward maximization phase is effective. Furthermore, the portfolio improvement method can achieve greater return rates while keeping the same risk level compared to portfolio interpolation. Extensive experiments are conducted on three real-world datasets. The results demonstrate the effectiveness and efficiency of the proposed framework.

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Publication Details

Journal
Proceedings of the VLDB Endowment
Published
2024-10-01
DOI
https://doi.org/10.14778/3705829.3705859
Citations
2
Primary Topic
Financial Markets and Investment Strategies
Type
article
Field-Weighted Citation Impact
1.08
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article

MILLION: A General Multi-Objective Framework with Controllable Risk for Portfolio Management

Tianfu Wang, Kai Zheng, Yan Zhao, Liwei Deng
2 citations
Proceedings of the VLDB Endowment
Financial Markets and Investment Strategies
1.08
article

MILLION: A General Multi-Objective Framework with Controllable Risk for Portfolio Management

Tianfu Wang, Kai Zheng, Yan Zhao, Liwei Deng
article en
2 citations

Abstract

Portfolio management is an important yet challenging task in AI for FinTech, which aims to allocate investors' budgets among different assets to balance the risk and return of an investment. In this study, we propose a general M ulti-object I ve framework with contro LL able r I sk for p O rtfolio ma N agement ( MILLION ), which consists of two main phases, i.e., return-related maximization and risk control. Specifically, in the return-related maximization phase, we introduce two auxiliary objectives, i.e., return rate prediction, and return rate ranking, combined with portfolio optimization to remit the overfitting problem and improve the generalization of the trained model to future markets. Subsequently, in the risk control phase, we propose two methods, i.e., portfolio interpolation and portfolio improvement, to achieve fine-grained risk control and fast risk adaption to a user-specified risk level. For the portfolio interpolation method, we theoretically prove that the risk can be perfectly controlled if the to-be-set risk level is in a proper interval. In addition, we also show that the return rate of the adjusted portfolio after portfolio interpolation is no less than that of the min-variance optimization, as long as the model in the reward maximization phase is effective. Furthermore, the portfolio improvement method can achieve greater return rates while keeping the same risk level compared to portfolio interpolation. Extensive experiments are conducted on three real-world datasets. The results demonstrate the effectiveness and efficiency of the proposed framework.

Proceedings of the VLDB EndowmentVol. 18(2)
University of Science and Technology of China (CN), University of Electronic Science and Technology of China (CN)
Openalex Percentile: Top 19%
Financial Markets and Investment Strategies
1.08
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