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IEOR seminar by Prof. Raghu Nandan Sengupta

Title: Bi-Objective Reliability Based Design Optimization: Applications in Portfolio Investment Analysis
 

Speaker: Raghu Nandan Sengupta, Department of Industrial and Management Engineering, IIT Kanpur

Day, Date, and Time: Thursday 19, January, 2:00 pm

Venue: LA 001, Lecture Hall Complex.
 

Abstract: The seminal work of Markowitz (1952) paved the way by opening up the exciting field of portfolio optimization to future researchers, whereby different variants of financial optimization models have been solved, with interesting results. Portfolio optimization problems are easy to address considering linear objective functions, subject to different risks, returns, and investment constraints, under the assumption of normal distribution of asset returns. Higher complexity arises if (i) non-linear assets, (ii) non-normal distribution of asset returns along with (iii) uncertainty in parameter estimates under an (iv) multi-objective framework is considered. In this paper, we solve two interesting variants of multi-objective financial optimization problems by considering non-normal asset return distributions along with uncertainty in parameter estimates. Pre-processing of the input data for optimization is accomplished using relevant ARCH and GARCH techniques applied on returns which are EVD. The efficacies of our proposed multi-objective reliability based portfolio optimization (MORBPO) problems, solved utilizing Genetic Algorithm (GA), and self-developed Python codes (for both optimization and reliability calculations) are demonstrated using data from the Indian financial markets. We present the detailed results pertaining to the optimal values of weights of investments, investment returns, variance, CVaR, EVaR, reliability index levels (β), and efficient Pareto optimal frontiers, and analyze the practical implications of these, before concluding the paper with some motivating future research ideas.

Speaker profile: Raghu Nandan Sengupta is associated with the IME Department, IIT Kanpur from the last 20 years where he is Professor at present. He has been the head of the IME department.  His research interest is in Theoretical Statistics, Reliability Theory, Robust Optimization, Quantitative Finance, etc. He teaches courses for PhD/MTech/MBA like Statistics & Probability, Multi-Criteria Decision Making, Stochastic Processes, Project Management, Total Quality Management, etc. He has been awarded fellowships like IUSSTF, DAAD, ERASMUS, EU-NAMASTE INDIA, etc., and has visited several universities/institutes in the USA, GERMANY, POLAND, PORTUGAL, TURKEY, IRAN, CANADA for research, teaching and invited talks/seminars