Structured hedging for resource allocations with leverage

Nicholas Johnson, Arindam Banerjee

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Data mining algorithms for computing solutions to online resource allocation (ORA) problems have focused on budgeting resources currently in possession, e.g., investing in the stock market with cash on hand or assigning current employees to projects. In several settings, one can leverage borrowed resources with which tasks can be accomplished more efficiently and cheaply. Additionally, a variety of opposing allocation types or positions may be available with which one can hedge the allocation to alleviate risk from external changes. In this paper, we present a formulation for hedging online resource allocations with leverage and propose an efficient data mining algorithm (SHERAL). We pose the problem as a constrained online convex optimization problem. The key novel components of our formulation are (1) a loss function for general leveraging and opposing allocation positions and (2) a penalty function which hedges between structurally dependent allocation positions to control risk. We instantiate the problem in the context of portfolio selection and evaluate the effectiveness of the formulation through extensive experiments on five datasets in comparison with existing algorithms and several variants.

Original languageEnglish (US)
Title of host publicationKDD 2015 - Proceedings of the 21st ACM SIGKDD Conference on Knowledge Discovery and Data Mining
PublisherAssociation for Computing Machinery
Pages477-486
Number of pages10
ISBN (Electronic)9781450336642
DOIs
StatePublished - Aug 10 2015
Externally publishedYes
Event21st ACM SIGKDD Conference on Knowledge Discovery and Data Mining, KDD 2015 - Sydney, Australia
Duration: Aug 10 2015Aug 13 2015

Publication series

NameProceedings of the ACM SIGKDD International Conference on Knowledge Discovery and Data Mining
Volume2015-August

Other

Other21st ACM SIGKDD Conference on Knowledge Discovery and Data Mining, KDD 2015
CountryAustralia
CitySydney
Period8/10/158/13/15

Keywords

  • Finance
  • Online learning
  • Structured learning

ASJC Scopus subject areas

  • Software
  • Information Systems

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