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Genetic Algorithms for Development of New Financial Products

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  • Eder Oliveira Abensur

    (Escola Politécnica e Faculdade de Economia, Administração e Contabilidade, Universidade de São Paulo)

Abstract

New Product Development (NPD) is recognized as a fundamental activity that has a relevant impact on the performance of companies. Despite the relevance of the financial market there is a lack of work on new financial product development. The aim of this research is to propose the use of Genetic Algorithms (GA) as an alternative procedure for evaluating the most favorable combination of variables for the product launch. The paper focuses on: (i) determining the essential variables of the financial product studied (investment fund); (ii) determining how to evaluate the success of a new investment fund launch and (iii) how GA can be applied to the financial product development problem. The proposed framework was tested using 4 years of real data from the Brazilian financial market and the results suggest that this is an innovative development methodology and useful for designing complex financial products with many attributes.

Suggested Citation

  • Eder Oliveira Abensur, 2007. "Genetic Algorithms for Development of New Financial Products," Brazilian Review of Finance, Brazilian Society of Finance, vol. 5(1), pages 59-77.
  • Handle: RePEc:brf:journl:v:5:y:2007:i:1:p:59-77
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    More about this item

    Keywords

    Genetic algorithms; product design; financial services;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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