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Time-varying minimum-cost portfolio insurance problem via an adaptive fuzzy-power LVI-PDNN

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  • Katsikis, Vasilios N.
  • Mourtas, Spyridon D.
  • Stanimirović, Predrag S.
  • Li, Shuai
  • Cao, Xinwei

Abstract

It is well known that minimum-cost portfolio insurance (MPI) is an essential investment strategy. This article presents a time-varying version of the original static MPI problem, which is thus more realistic. Then, to solve it efficiently, we propose a powerful recurrent neural network called the linear-variational-inequality primal-dual neural network (LVI-PDNN). By doing so, we overcome the drawbacks of the static approach and propose an online solution. In order to improve the performance of the standard LVI-PDNN model, an adaptive fuzzy-power LVI-PDNN (F-LVI-PDNN) model is also introduced and studied. This model combines the fuzzy control technique with LVI-PDNN. Numerical experiments and computer simulations confirm the F-LVI-PDNN model’s superiority over the LVI-PDNN model and show that our approach is a splendid option to accustomed MATLAB procedures.

Suggested Citation

  • Katsikis, Vasilios N. & Mourtas, Spyridon D. & Stanimirović, Predrag S. & Li, Shuai & Cao, Xinwei, 2023. "Time-varying minimum-cost portfolio insurance problem via an adaptive fuzzy-power LVI-PDNN," Applied Mathematics and Computation, Elsevier, vol. 441(C).
    • Handle: RePEc:eee:apmaco:v:441:y:2023:i:c:s0096300322007688
    DOI: 10.1016/j.amc.2022.127700
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    1. Aliprantis, C. D. & Brown, D. J. & Werner, J., 2000. "Minimum-cost portfolio insurance," Journal of Economic Dynamics and Control, Elsevier, vol. 24(11-12), pages 1703-1719, October.
    2. Katsikis, Vasilios N. & Mourtas, Spyridon D. & Stanimirović, Predrag S. & Li, Shuai & Cao, Xinwei, 2020. "Time-varying minimum-cost portfolio insurance under transaction costs problem via Beetle Antennae Search Algorithm (BAS)," Applied Mathematics and Computation, Elsevier, vol. 385(C).
    3. Spyridon D. Mourtas & Chrysostomos Kasimis, 2022. "Exploiting Mean-Variance Portfolio Optimization Problems through Zeroing Neural Networks," Mathematics, MDPI, vol. 10(17), pages 1-20, August.
    4. Katsikis, Vasilios N. & Mourtas, Spyridon D., 2019. "A heuristic process on the existence of positive bases with applications to minimum-cost portfolio insurance in C[a, b]," Applied Mathematics and Computation, Elsevier, vol. 349(C), pages 221-244.
    5. Vasilios N. Katsikis & Spyridon D. Mourtas & Predrag S. Stanimirović & Shuai Li & Xinwei Cao, 2021. "Time-Varying Mean-Variance Portfolio Selection under Transaction Costs and Cardinality Constraint Problem via Beetle Antennae Search Algorithm (BAS)," SN Operations Research Forum, Springer, vol. 2(2), pages 1-26, June.
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