Students: Jesus Dominguez Castaneda & Rha Overstreet

Project: Computational Value at Risk Optimization and Applications

Poster: Horizontal (PDF) | Vertical (PDF)

Institution: Lehigh University

Major: IBE / Industrial & Systems Engineering

Advisor: Akwum Onwunta

Abstract

Financial markets have proven to be less reliable than previously thought. With a multitude of pandemics, market crashes, global recessions, and wars occurring in the past couple of decades, it can be observed that financial markets are a risky place for asset allocation. The issue with this is that the only way to grow assets outside of entrepreneurship is investing in said markets. This can be done either through a high yield savings account, hiring a wealth manager, or becoming a retail investor. The first option does not compete with inflation, so in effect, the value of your assets is diminishing. The second option requires a large amount of capital to afford the fees and options presented to you. The third is extremely risky, where a majority of retail traders are unprofitable. Computational Risk Averse Optimization in Finance is about using the Conditional Variance at Risk (CVaR) method to optimize asset portfolio weights to protect investors from the aforementioned improbable outcomes in the markets. The CVaR constraint uses the mean of the beta of a portfolio return distribution to create an optimized weighted portfolio that minimizes investor's losses. This method is contradictory to other portfolio optimization methods that are meant to maximize returns. Our method enables the investor to reap the rewards of positive market runs all while protecting them against market crashes. Using CVaR and machine learning techniques to predict optimal portfolio allocations, we hope to create a system that will help protect the assets of everyday people.

Jesus Dominguez Castaneda

About Jesus Dominguez Castaneda

Jesus Dominguez Castaneda is Senior at Lehigh University majoring in Industrial & Systems Engineering with a minor in computer science. His interests lie between the intersection of business, technology, and engineering. Last summer, Jesus interned at Nalco Water, an Ecolab Company as an engineering consulting intern, where he implemented a treatment optimization plan. In addition to his research, he currently serves as the chapter president of Lehigh University’s Society of Hispanic Professional Engineers (SHPE). In his free time, Jesus enjoys watching fútbol, playing pickleball, and engaging in the community.

Rha Overstreet

About Rha Overstreet

Rha Overstreet is a Senior at Lehigh University studying Financial Engineering in the Integrated Business and Engineering interdisciplinary Honors program. He studies under the P.C. Rossin College of Engineering in the Industrial Systems and Engineering department as well as the College of Business in the Parella department of Finance. He is currently participating in an independent research program through the ISE department at Lehigh. He is also a swing trader for a proprietary trading firm. This summer he will be interning for Goldman Sachs as an analyst in their wealth management division. He enjoys learning about event driven simulation, machine learning, and optimization practices. With his strong analytical skills he is able to effectively bridge his engineering capabilities and his financial knowledge. Rha enjoys reading, working out, cooking, and going on bike rides in his free time.