Evolutionary estimation of a Coupled Markov Chain credit risk model

There exists a range of different models for estimating and simulating credit risk transitions to optimally manage credit risk portfolios and products. In this chapter we present a Coupled Markov Chain approach to model rating transitions and thereby default probabilities of companies. As the likelihood of the model turns out to be a non-convex function of the parameters to be estimated, we apply heuristics to find the ML estimators. To this extent, we outline the model and its likelihood function, and present both a Particle Swarm Optimization algorithm, as well as an Evolutionary Optimization algorithm to maximize the likelihood function. Numerical results are shown which suggest a further application of evolutionary optimization techniques for credit risk management

Free Search and Particle Swarm Optimisation applied to Non-constrained Test

This article presents an evaluation of Particle Swarm Optimisation (PSO) with variable inertia weight and Free Search (FS) with variable neighbour space applied to nonconstrained numerical test. The objectives are to assess how high convergence speed reflects on adaptation to various test problems and to identify possible balance between convergence speed and adaptation, which allows the algorithms to complete successfully the process of search on heterogeneous tasks with limited computational resources within a reasonable finite time and with acceptable for engineering purposes precision. Modification strategies of both algorithms are compared in terms of their ability for search space exploration. Five numerical tests are explored. Achieved experimental results are presented and analysed

Particle Swarm Optimization

Particle swarm optimization (PSO) is a population based stochastic optimization technique influenced by the social behavior of bird flocking or fish schooling.PSO shares many similarities with evolutionary computation techniques such as Genetic Algorithms (GA). The system is initialized with a population of random solutions and searches for optima by updating generations. However, unlike GA, PSO has no evolution operators such as crossover and mutation. In PSO, the potential solutions, called particles, fly through the problem space by following the current optimum particles. This book represents the contributions of the top researchers in this field and will serve as a valuable tool for professionals in this interdisciplinary field

Mitigating spread of contamination in meat supply chain management using deep learning

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Coordinated optimal control of secondary cooling and final electromagnetic stirring for continuous casting billets

Secondary cooling and final electromagnetic stirring (F-EMS) are both key technologies for continuous casting. These parameters are usually optimized and controlled separately which caused internal quality fluctuations in unsteady conditions. In this paper, a coordinated optimal control strategy based on a multiobjective particle swarm optimization (MOPSO) algorithm is proposed for the parameter optimization of secondary cooling and F-EMS, which is solved based on multiobjective particle swarm optimization (MOPSO) algorithm. The solidification and heat transfer model are developed for the computation of billet temperature and the solidification, and the adaptive grid method is used to improve the diversity and robustness of optimal solutions. The secondary cooling water and F-EMS’ stirring current are dynamically controlled based on the optimization results. The results of field trials showed that the maximum carbon segregation and other quality indexes of billets can be improved significantly

A survey on financial applications of metaheuristics

Modern heuristics or metaheuristics are optimization algorithms that have been increasingly used during the last decades to support complex decision-making in a number of fields, such as logistics and transportation, telecommunication networks, bioinformatics, finance, and the like. The continuous increase in computing power, together with advancements in metaheuristics frameworks and parallelization strategies, are empowering these types of algorithms as one of the best alternatives to solve rich and real-life combinatorial optimization problems that arise in a number of financial and banking activities. This article reviews some of the works related to the use of metaheuristics in solving both classical and emergent problems in the finance arena. A non-exhaustive list of examples includes rich portfolio optimization, index tracking, enhanced indexation, credit risk, stock investments, financial project scheduling, option pricing, feature selection, bankruptcy and financial distress prediction, and credit risk assessment. This article also discusses some open opportunities for researchers in the field, and forecast the evolution of metaheuristics to include real-life uncertainty conditions into the optimization problems being considered.This work has been partially supported by the Spanish Ministry of Economy and Competitiveness (TRA2013-48180-C3-P, TRA2015-71883-REDT), FEDER, and the Universitat Jaume I mobility program (E-2015-36)

Geneettinen Algoritmi Optimaalisten Investointistrategioiden Määrittämiseen

Investors including banks, insurance companies and private investors are in a constant need for new investment strategies and portfolio selection methods. In this work we study the developed models, forecasting methods and portfolio management approaches. The information is used to create a decision-making system, or investment strategy, to form stock investment portfolios. The decision-making system is optimized using a genetic algorithm to find profitable low risk investment strategies. The constructed system is tested by simulating its performance with a large set of real stock market and economic data. The tests reveal that the constructed system requires a large sample of stock market and economic data before it finds well performing investment strategies. The parameters of the decision-making system converge surprisingly fast and the available computing capacity turned out to be sufficient even when a large amount of data is used in the system calibration. The model seems to find logics that govern stock market behavior. With a sufficient large amount of data for the calibration, the decision-making model finds strategies that work with regard to profit and portfolio diversification. The recommended strategies worked also outside the sample data that was used for system parameter identification (calibration). This work was done at Unisolver Ltd.Investoijat kuten pankit, vakuutusyhtiöt ja yksityissijoittajat tarvitsevat jatkuvasti uusia investointistrategioita portfolioiden määrittämiseen. Tässä työssä tutkitaan aiemmin kehitettyjä sijoitusmalleja, ennustemenetelmiä ja sijoitussalkun hallinnassa yleisesti käytettyjä lähestymistapoja. Löydettyä tietoa hyödyntäen kehitetään uusi päätöksentekomenetelmä (investointistrategia), jolla määritetään sijoitussalkun sisältö kunakin ajanhetkenä. Päätöksentekomalli optimoidaan geneettisellä algoritmilla. Tavoitteena on löytää tuottavia ja pienen riskin investointistrategioita. Kehitetyn mallin toimintaa simuloidaan suurella määrällä todellista pörssi- ja talousaineistoa. Testausvaihe osoittaakin, että päätöksentekomallin optimoinnissa tarvitaan suuri testiaineisto toimivien strategioiden löytämiseksi. Rakennetun mallin parametrit konvergoivat optimointivaiheessa nopeasti. Käytettävissä oleva laskentateho osoittautui riittäväksi niissäkin tilanteissa, joissa toisten menetelmien laskenta laajan aineiston takia hidastuu. Malli vaikuttaa löytävän logiikkaa, joka ymmärtää pörssikurssien käyttäytymistä. Riittävän suurella testiaineistolla malli löytää strategioita, joilla saavutetaan hyvä tuotto ja pieni riski. Strategiat toimivat myös mallin kalibroinnissa käytetyn aineiston ulkopuolella, tuottaen hyviä sijoitussalkkuja. Työ tehtiin Unisolver Oy:ssä

Step-Optimized Particle Swarm Optimization

Particle swarm optimization (PSO) is widely used in industrial and academic research to solve optimization problems. Recent developments of PSO show a direction towards adaptive PSO (APSO). APSO changes its behaviour during the optimization process based on information gathered at each iteration. It has been shown that APSO is able to solve a wide range of difficult optimization problems efficiently and effectively. In classical PSO, all parameters are fixed for the entire swarm. In particular, all particles share the same settings of their velocity weights. We propose four APSO variants in which every particle has its own velocity weights. We use PSO to optimize the settings of the velocity weights of every particle at every iteration, thereby creating a step-optimized PSO (SOPSO). We implement four known PSO variants (global best PSO, decreasing weight PSO, time-varying acceleration coefficients PSO, and guaranteed convergence PSO) and four proposed APSO variants (SOPSO, moving bounds SOPSO, repulsive SOPSO, and moving bound repulsive SOPSO) in a PSO software package. The PSO software package is used to compare the performance of the PSO and APSO variants on 22 benchmark problems. Test results show that the proposed APSO variants outperform the known PSO variants on difficult optimization problems that require large numbers of function evaluations for their solution. This suggests that the SOPSO strategy of optimizing the settings of the velocity weights of every particle improves the robustness and performance of PSO