Regularizing Portfolio Optimization

The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in effect, very far from optimal with respect to the average risk. In this paper, we approach the problem from the point of view of statistical learning theory. The occurrence of the instability is intimately related to over-fitting which can be avoided using known regularization methods. We show how regularized portfolio optimization with the expected shortfall as a risk measure is related to support vector regression. The budget constraint dictates a modification. We present the resulting optimization problem and discuss the solution. The L2 norm of the weight vector is used as a regularizer, which corresponds to a diversification "pressure". This means that diversification, besides counteracting downward fluctuations in some assets by upward fluctuations in others, is also crucial because it improves the stability of the solution. The approach we provide here allows for the simultaneous treatment of optimization and diversification in one framework that enables the investor to trade-off between the two, depending on the size of the available data set

Multi-group support vector machines with measurement costs a biobjective approach

Support Vector Machine has shown to have good performance in many practical classification settings. In this paper we propose, for multi-group classification, a biobjective optimization model in which we consider not only the generalization ability (modelled through the margin maximization), but also costs associated with the features. This cost is not limited to an economical payment, but can also refer to risk, computational effort, space requirements, etc. We introduce a biobjective mixed integer problem, for which Pareto optimal solutions are obtained. Those Pareto optimal solutions correspond to different classification rules, among which the user would choose the one yielding the most appropriate compromise between the cost and the expected misclassification rate.Ministerio de Ciencia y TecnologíaPlan Andaluz de Investigació

Support vector machines for classification of input vectors with different metrics

In this paper, a generalization of support vector machines is explored where it is considered that input vectors have different ℓp norms for each class. It is proved that the optimization problem for binary classification by using the maximal margin principle with ℓp and ℓq norms only depends on the ℓp norm if 1 ≤ p ≤ q. Furthermore, the selection of a different bias in the classifier function is a consequence of the ℓq norm in this approach. Some commentaries on the most commonly used approaches of SVM are also given as particular cases

Exploring the potential of 3D Zernike descriptors and SVM for protein\u2013protein interface prediction

Abstract Background The correct determination of protein–protein interaction interfaces is important for understanding disease mechanisms and for rational drug design. To date, several computational methods for the prediction of protein interfaces have been developed, but the interface prediction problem is still not fully understood. Experimental evidence suggests that the location of binding sites is imprinted in the protein structure, but there are major differences among the interfaces of the various protein types: the characterising properties can vary a lot depending on the interaction type and function. The selection of an optimal set of features characterising the protein interface and the development of an effective method to represent and capture the complex protein recognition patterns are of paramount importance for this task. Results In this work we investigate the potential of a novel local surface descriptor based on 3D Zernike moments for the interface prediction task. Descriptors invariant to roto-translations are extracted from circular patches of the protein surface enriched with physico-chemical properties from the HQI8 amino acid index set, and are used as samples for a binary classification problem. Support Vector Machines are used as a classifier to distinguish interface local surface patches from non-interface ones. The proposed method was validated on 16 classes of proteins extracted from the Protein–Protein Docking Benchmark 5.0 and compared to other state-of-the-art protein interface predictors (SPPIDER, PrISE and NPS-HomPPI). Conclusions The 3D Zernike descriptors are able to capture the similarity among patterns of physico-chemical and biochemical properties mapped on the protein surface arising from the various spatial arrangements of the underlying residues, and their usage can be easily extended to other sets of amino acid properties. The results suggest that the choice of a proper set of features characterising the protein interface is crucial for the interface prediction task, and that optimality strongly depends on the class of proteins whose interface we want to characterise. We postulate that different protein classes should be treated separately and that it is necessary to identify an optimal set of features for each protein class

Supervised Classification and Mathematical Optimization

Data Mining techniques often ask for the resolution of optimization problems. Supervised Classification, and, in particular, Support Vector Machines, can be seen as a paradigmatic instance. In this paper, some links between Mathematical Optimization methods and Supervised Classification are emphasized. It is shown that many different areas of Mathematical Optimization play a central role in off-the-shelf Supervised Classification methods. Moreover, Mathematical Optimization turns out to be extremely useful to address important issues in Classification, such as identifying relevant variables, improving the interpretability of classifiers or dealing with vagueness/noise in the data

A mathematical programming approach to SVM-based classification with label noise

The authors of this research acknowledge financial support by the Spanish Ministerio de Ciencia y Tecnologia, Agencia Estatal de Investigacion and Fondos Europeos de Desarrollo Regional (FEDER) via project PID2020114594GB-C21. The authors also acknowledge partial support from projects FEDER-US-1256951, Junta de Andalucía P18-FR-1422, CEI-3-FQM331, NetmeetData: Ayudas Fundación BBVA a equipos de investigación científica 2019. The first author was also supported by projects P18-FR-2369 (Junta de Andalucía) and IMAG-Maria de Maeztu grant CEX2020-001105-M /AEI /10.13039/501100011033. (Spanish Ministerio de Ciencia y Tecnologia).In this paper we propose novel methodologies to optimally construct Support Vector Machine-based classifiers that take into account that label noise occur in the training sample. We propose different alternatives based on solving Mixed Integer Linear and Non Linear models by incorporating decisions on relabeling some of the observations in the training dataset. The first method incorporates relabeling directly in the SVM model while a second family of methods combines clustering with classification at the same time, giving rise to a model that applies simultaneously similarity measures and SVM. Extensive computational experiments are reported based on a battery of standard datasets taken from UCI Machine Learning repository, showing the effectiveness of the proposed approaches.Spanish Ministerio de Ciencia y Tecnologia, Agencia Estatal de Investigacion and Fondos Europeos de Desarrollo Regional (FEDER) via project PID2020114594GB-C21FEDER-US-1256951Junta de Andalucía P18-FR-1422CEI-3-FQM331NetmeetData: Ayudas Fundación BBVA a equipos de investigación científica 2019Project P18-FR-2369 Junta de AndalucíaIMAG-Maria de Maeztu grant CEX2020-001105-M /AEI /10.13039/501100011033. (Spanish Ministerio de Ciencia y Tecnologia