Diversifying risk in portfolios using a variable-size genetic relation algorithm

Victor Parque, Shingo Mabu, Kotaro Hirasawa

Research output: Contribution to journalArticle

Abstract

One important concept in financial risk management is the diversification process of capital allocation. This paper proposes an evolutionary approach for the optimal diversification when making asset allocation using variable-size genetic relation algorithm (vs-GRA), whose main role is to model and evolve structures toward effective and diversified portfolios through its graph structure. Simulations using heterogeneous and globally located asset classes in the United States, Europe, and Asia show that the proposed scheme offers competitive economic advantages.

Original languageEnglish
Pages (from-to)291-299
Number of pages9
JournalIEEJ Transactions on Electrical and Electronic Engineering
Volume7
Issue number3
DOIs
Publication statusPublished - 2012 May

Keywords

  • Asset allocation
  • Evolutionary finance
  • Portfolio diversification
  • Variable-size genetic relation algorithm

ASJC Scopus subject areas

  • Electrical and Electronic Engineering

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