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Accelerated Portfolio Optimization and Option Pricing with Reinforcement Learning

Portfolio Management 2025-07-04 v1 Artificial Intelligence Machine Learning Computational Finance

Abstract

We present a reinforcement learning (RL)-driven framework for optimizing block-preconditioner sizes in iterative solvers used in portfolio optimization and option pricing. The covariance matrix in portfolio optimization or the discretization of differential operators in option pricing models lead to large linear systems of the form Ax=b\mathbf{A}\textbf{x}=\textbf{b}. Direct inversion of high-dimensional portfolio or fine-grid option pricing incurs a significant computational cost. Therefore, iterative methods are usually used for portfolios in real-world situations. Ill-conditioned systems, however, suffer from slow convergence. Traditional preconditioning techniques often require problem-specific parameter tuning. To overcome this limitation, we rely on RL to dynamically adjust the block-preconditioner sizes and accelerate iterative solver convergence. Evaluations on a suite of real-world portfolio optimization matrices demonstrate that our RL framework can be used to adjust preconditioning and significantly accelerate convergence and reduce computational cost. The proposed accelerated solver supports faster decision-making in dynamic portfolio allocation and real-time option pricing.

Keywords

Cite

@article{arxiv.2507.01972,
  title  = {Accelerated Portfolio Optimization and Option Pricing with Reinforcement Learning},
  author = {Hadi Keramati and Samaneh Jazayeri},
  journal= {arXiv preprint arXiv:2507.01972},
  year   = {2025}
}
R2 v1 2026-07-01T03:43:41.954Z