DEVS Modeling and Simulation of Financial Leverage Effect Based on Markov Decision Process

Abstract

Decision making during a financial asset optimization process leading to a potential leverage effect is a major issue in the management of an investment program such as European development programs. Modeling and simulation based on reinforcement learning can propose a decision-making policy in this kind of process. This paper presents a DEVS discrete-event modeling and simulation approach from Markov decision-making processes applied to the search for maximum leverage on self-financing capabilities in grant application instruction phase. The application of the approach presented in this paper is made on the search for the leverage effect linked to the price volatility of the main stock market indices (CAC40, NasDaq, etc.).