Deep Decoding of Strategies

20 Pages Posted: 16 Jun 2022 Last revised: 5 May 2024

See all articles by Jean-Jacques Ohana

Jean-Jacques Ohana

AI For Alpha

Eric Benhamou

Université Paris Dauphine; AI For Alpha; EB AI Advisory; Université Paris-Dauphine, PSL Research University

David Saltiel

Université Paris Dauphine; A.I. Square Connect; AI For Alpha

Beatrice Guez

AI For Alpha

Date Written: June 6, 2022

Abstract

To the best of our knowledge, the application of machine learning and in particular graphical models in the field of quantitative risk management is still a relatively recent and new phenomenon. This paper presents a new and effective methodology for decoding strategies. Given an investment universe, we calculate dynamic weights for a sparse portfolio whose aim is to replicate the strategy with the most stable allocation rules. Naturally, this can be formulated as a reinforcement learning problem whose reward is a weighted sum of tracking error and turnover. We show on stylized examples that we can accurately decode strategies or funds with meaningful factors and allocations.

Keywords: Decoding, risk management

JEL Classification: G12, G13

Suggested Citation

Ohana, Jean-Jacques and Benhamou, Eric and Saltiel, David and Guez, Beatrice, Deep Decoding of Strategies (June 6, 2022). Université Paris-Dauphine Research Paper No. 4128693, Available at SSRN: https://ssrn.com/abstract=4128693 or http://dx.doi.org/10.2139/ssrn.4128693

Jean-Jacques Ohana

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Eric Benhamou (Contact Author)

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

EB AI Advisory ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

David Saltiel

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

A.I. Square Connect ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Beatrice Guez

AI For Alpha ( email )

35 boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
20,355
Abstract Views
57,045
Rank
288
PlumX Metrics