Reinforcement learning-driven optimal capital allocation for intelligent finance
- 1School of Intelligent Logistics and Supply Chain, Sichuan Vocational and Technical College, Suining, Sichuan, China.
Abstract
Optimal capital allocation in financial markets has long been a challenging task due to the dynamic nature of market conditions, risk factors, and the complexity of financial data. Traditional methods of portfolio management often fail to adapt to market shifts and do not fully leverage potential of modern machine learning techniques. To develop a model that dynamically optimizes capital allocation, leveraging reinforcement learning (RL), with focus on risk management, stability, and adaptability. Proposed model, Dynamic Actor-Critic (DAC)-enriched Clipped Proximal Policy Optimization (DAC-CPPO) model for portfolio optimization. A Dynamic Actor-Critic (DAC)-enriched Clipped Proximal Policy Optimization (DAC-CPPO) model is developed for portfolio optimization. The Dynamic Actor-Critic module learns optimal portfolio policies by evaluating actions and maximizing long-term returns, while the CPPO mechanism ensures stable policy updates and risk-controlled portfolio optimization. The Intelligent Finance Assets dataset contains 7,000 records with 32 features, whereas the Massive Yahoo Finance dataset includes 603k records with 9 features, collected from publicly available Kaggle sources for financial analysis. Normalization and data cleaning techniques for smooth data integration and model readiness, and LDA extracts discriminative financial features to improve portfolio allocation prediction performance. Experimental settings are implemented using Python. Proposed DAC-CPPO model, achieving 97.6% accuracy, 0.074 MAE, 0.081 RMSE, 1.91 Sharpe ratio, 1.12 Cumulative return, and 0.14 Volatility, demonstrates superior risk-adjusted performance, offering higher returns while managing market risks effectively compared to other existing models. The DAC-CPPO model offers a robust solution for practical capital allocation by combining advanced RL techniques, ensuring effective decision-making while managing risks in dynamic financial environments.
Related
- Eco-Evolutionary Optimal Carbon Allocation in a MechanisticCrop Growth Model: Theory and Application to Wheat
- Intelligent differential ion mobility spectrometry (iDMS): A deep neural network that predicts optimal space-resolved ion mobility parameters for isomeric monoglycosphingolipids
- Desktop iDMS: A stand-alone application of intelligent differential mobility spectrometry (iDMS), a neural net-work that predicts optimal separation and compensa-tion voltages for field asymmetric differential ion mobil-ity spectrometry
- An embedded deep learning–fuzzy logic framework for intelligent and automated irrigation in smart farming
- Uncovering traditional retail location competition with machine learning: The role of urban environments in light-asset and capital-intensive formats
BibTeX
@article{luo2026reinforcement,
title = {{Reinforcement learning-driven optimal capital allocation for intelligent finance}},
author = {Yan Luo and Mingchun Qi and Mingshan Cheng},
journal = {PLOS One},
year = {2026},
month = oct,
doi = {10.1371/journal.pone.0348010},
url = {https://doi.org/10.1371/journal.pone.0348010},
note = {CC BY},
}
RIS
TY - JOUR
TI - Reinforcement learning-driven optimal capital allocation for intelligent finance
AU - Yan Luo
AU - Mingchun Qi
AU - Mingshan Cheng
PY - 2026
DA - 2026/10/20
JO - PLOS One
DO - 10.1371/journal.pone.0348010
UR - https://doi.org/10.1371/journal.pone.0348010
AB - Optimal capital allocation in financial markets has long been a challenging task due to the dynamic nature of market conditions, risk factors, and the complexity of financial data. Traditional methods of portfolio management often fail to adapt to market shifts and do not fully leverage potential of modern machine learning techniques. To develop a model that dynamically optimizes capital allocation, leveraging reinforcement learning (RL), with focus on risk management, stability, and adaptability. Proposed model, Dynamic Actor-Critic (DAC)-enriched Clipped Proximal Policy Optimization (DAC-CPPO) model for portfolio optimization. A Dynamic Actor-Critic (DAC)-enriched Clipped Proximal Policy Optimization (DAC-CPPO) model is developed for portfolio optimization. The Dynamic Actor-Critic module learns optimal portfolio policies by evaluating actions and maximizing long-term returns, while the CPPO mechanism ensures stable policy updates and risk-controlled portfolio optimization. The Intelligent Finance Assets dataset contains 7,000 records with 32 features, whereas the Massive Yahoo Finance dataset includes 603k records with 9 features, collected from publicly available Kaggle sources for financial analysis. Normalization and data cleaning techniques for smooth data integration and model readiness, and LDA extracts discriminative financial features to improve portfolio allocation prediction performance. Experimental settings are implemented using Python. Proposed DAC-CPPO model, achieving 97.6% accuracy, 0.074 MAE, 0.081 RMSE, 1.91 Sharpe ratio, 1.12 Cumulative return, and 0.14 Volatility, demonstrates superior risk-adjusted performance, offering higher returns while managing market risks effectively compared to other existing models. The DAC-CPPO model offers a robust solution for practical capital allocation by combining advanced RL techniques, ensuring effective decision-making while managing risks in dynamic financial environments.
SN - 1932-6203
ER -