Conditionally Elicitable Dynamic Risk Measures for Deep Reinforcement Learning

Coache, Anthony; Jaimungal, Sebastian; Cartea, Álvaro

doi:10.2139/ssrn.4149461

Cited by 4 publications

(2 citation statements)

References 28 publications

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“…Financial applications such as statistical arbitrage and portfolio optimization are discussed with detailed numerical examples. Coache and Jaimungal (2021) develops a framework combining policy‐gradient‐based RL method and dynamic convex risk measures for solving time‐consistent risk‐sensitive stochastic optimization problems. However, there is no sample complexity or asymptotic convergence studied for the proposed algorithms in Jaimungal et al.…”

Section: Further Developments For Mathematical Finance and Reinforcem...mentioning

confidence: 99%

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Recent advances in reinforcement learning in finance

Hambly

Yang

2023

Mathematical Finance

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The rapid changes in the finance industry due to the increasing amount of data have revolutionized the techniques on data processing and data analysis and brought new theoretical and computational challenges. In contrast to classical stochastic control theory and other analytical approaches for solving financial decision‐making problems that heavily reply on model assumptions, new developments from reinforcement learning (RL) are able to make full use of the large amount of financial data with fewer model assumptions and to improve decisions in complex financial environments. This survey paper aims to review the recent developments and use of RL approaches in finance. We give an introduction to Markov decision processes, which is the setting for many of the commonly used RL approaches. Various algorithms are then introduced with a focus on value‐ and policy‐based methods that do not require any model assumptions. Connections are made with neural networks to extend the framework to encompass deep RL algorithms. We then discuss in detail the application of these RL algorithms in a variety of decision‐making problems in finance, including optimal execution, portfolio optimization, option pricing and hedging, market making, smart order routing, and robo‐advising. Our survey concludes by pointing out a few possible future directions for research.

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Section: Further Developments For Mathematical Finance and Reinforcem...mentioning

confidence: 99%

“…However, there is no sample complexity or asymptotic convergence studied for the proposed algorithms in Jaimungal et al. (2021); Coache and Jaimungal (2021).…”

Section: Further Developments For Mathematical Finance and Reinforcem...mentioning

confidence: 99%