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Accepted Paper at ECAI 2023

Simplex Decomposition for Portfolio Allocation Constraints in Reinforcement Learning



David Winkel, Niklas Strauß, Matthias Schubert, Thomas Seidl

ecai23_logo26th European Conference on Artificial Intelligence (ECAI 2023), 30.09–05.10 2023, Kraków, Poland



Portfolio optimization tasks describe sequential decision problems in which the investor's wealth is distributed across a set of assets. Allocation constraints are used to enforce minimal or maximal investments into particular subsets of assets to control for objectives such as limiting the portfolio's exposure to a certain sector due to environmental concerns. Although methods for CRL can optimize policies while considering allocation constraints, it can be observed that these general methods yield suboptimal results. In this paper, we propose a novel approach to handle allocation constraints based on a decomposition of the constraint action space into a set of unconstrained allocation problems. In particular, we examine this approach for the case of two constraints. For example, an investor may wish to invest at least a certain percentage of the portfolio into green technologies while limiting the investment in the fossil energy sector. We show that the action space of the task is equivalent to the decomposed action space, and introduce a new RL approach CAOSD, which is built on top of the decomposition. The experimental evaluation on real-world nasdaq-data demonstrates that our approach consistently outperforms state-of-the-art CRL benchmarks for portfolio optimization.