From deterministic to stochastic: an interpretable stochastic model-free reinforcement learning framework for portfolio optimization

Management of investment portfolios employing reinforcement learning

Investors are presented with a multitude of options and markets for pursuing higher returns, a task that often proves complex and challenging. This study examines the effectiveness of reinforcement learning (RL) algorithms in optimizing investment portfolios, comparing their performance with traditional strategies and benchmarking against American and Brazilian indices. Additionally, it was explore the impact of incorporating commodity derivatives into portfolios and the associated transaction costs. The results indicate that the inclusion of derivatives can significantly enhance portfolio performance while reducing volatility, presenting an attractive opportunity for investors. RL techniques also demonstrate superior effectiveness in portfolio optimization, resulting in an average increase of 12% in returns without a commensurate increase in risk. Consequently, this research makes a substantial contribution to the field of finance. It not only sheds light on the application of RL but also provides valuable insights for academia. Furthermore, it challenges conventional notions of market efficiency and modern portfolio theory, offering practical implications. It suggests that data-driven investment management holds the potential to enhance efficiency, mitigate conflicts of interest, and reduce biased decision-making, thereby transforming the landscape of financial investment.

A Multiscale Recursive Attention Gate Federation Method for Multiple Working Conditions Fault Diagnosis

Federated learning (FL) is an effective method when a single client cannot provide enough samples for multiple condition fault diagnosis of bearings since it can combine the information provided by multiple clients. However, some of the client's working conditions are different; for example, different clients are in different stages of the whole life cycle, and different clients have different loads. At this point, the status of each client is not equal, and the traditional FL approach will lead to some clients' useful information being ignored. The purpose of this paper is to investigate a multiscale recursive FL framework that makes the server more focused on the useful information provided by the clients to ensure the effectiveness of FL. The proposed FL method can build reliable multiple working condition fault diagnosis models due to the increased focus on useful information in the FL process and the full utilization of server information through local multiscale feature fusion. The validity of the proposed method was verified with the Case Western Reserve University benchmark dataset. With less local client training data and complex fault types, the proposed method improves the accuracy of fault diagnosis by 23.21% over the existing FL fault diagnosis.