Generative Adversarial Networks for Portfolio Optimization in Asset Management

Adarsh Naidu

doi:10.5281/zenodo.15104122

Generative Adversarial Networks for Portfolio Optimization in Asset Management

Author(s)	Adarsh Naidu
Country	United States
Abstract	This study examines the use of Generative Adversarial Networks (GANs) for producing synthetic market data to improve portfolio optimization in asset management. Conventional portfolio optimization methods heavily depend on historical data, which is often limited by sparsity, lack of representativeness for future conditions, and an inability to capture intricate market behaviours. Our proposed approach utilizes GANs to generate synthetic financial time series that retain the statistical properties and interdependencies of real market data. These artificially generated datasets are incorporated into mean-variance optimization frameworks to enhance asset allocation and risk management. Empirical tests using historical returns from the S&P 500, a bond index, and gold prices reveal that portfolios optimized with GAN-generated data achieve superior out-of-sample performance in terms of Sharpe ratio and maximum drawdown compared to those relying solely on historical data. This method supports comprehensive stress testing and scenario analysis, equipping portfolio managers with a robust tool to simulate various market conditions, including rare financial events. Our findings underscore the potential of GANs to transform asset management by integrating advanced machine learning techniques with financial theory. We explore practical applications such as risk assessment enhancements and propose further research directions, including refining GAN architectures and increasing model interpretability, to enhance the efficacy of this approach.
Keywords	Generative Adversarial Networks, Synthetic Data, Portfolio Optimization, Asset Management, Financial Time Series, Mean-Variance Optimization, Risk Management, Stress Testing, Sharpe Ratio, Market Conditions
Field	Engineering
Published In	Volume 13, Issue 2, July-December 2022
Published On	2022-08-03
Cite This	Generative Adversarial Networks for Portfolio Optimization in Asset Management - Adarsh Naidu - IJAIDR Volume 13, Issue 2, July-December 2022. DOI 10.5281/zenodo.15104122
DOI	https://doi.org/10.5281/zenodo.15104122
Short DOI	https://doi.org/g897vx

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Generative Adversarial Networks for Portfolio Optimization in Asset Management

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