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A Polynomial Optimization Approach to Constant Rebalanced Portfolio Selection

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Listed:
  • Takano, Y.
  • Sotirov, R.

    (Tilburg University, Center For Economic Research)

Abstract

We address the multi-period portfolio optimization problem with the constant rebalancing strategy. This problem is formulated as a polynomial optimization problem (POP) by using a mean-variance criterion. In order to solve the POPs of high degree, we develop a cutting-plane algorithm based on semidefinite programming. Our algorithm can solve problems that can not be handled by any of known polynomial optimization solvers. Copyright The Author(s) 2012
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Takano, Y. & Sotirov, R., 2010. "A Polynomial Optimization Approach to Constant Rebalanced Portfolio Selection," Discussion Paper 2010-114, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:50bcc54f-7451-4e27-88a5-305489e34f41
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    References listed on IDEAS

    as
    1. Hiroshi Konno & Rei Yamamoto, 2005. "A Mean-Variance-Skewness Model: Algorithm And Applications," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 409-423.
    2. Maranas, C. D. & Androulakis, I. P. & Floudas, C. A. & Berger, A. J. & Mulvey, J. M., 1997. "Solving long-term financial planning problems via global optimization," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1405-1425, June.
    3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    4. Luenberger, David G., 1997. "Investment Science," OUP Catalogue, Oxford University Press, number 9780195108095.
    5. Hibiki, Norio, 2006. "Multi-period stochastic optimization models for dynamic asset allocation," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 365-390, February.
    6. David G. Luenberger & Yinyu Ye, 2008. "Linear and Nonlinear Programming," International Series in Operations Research and Management Science, Springer, edition 0, number 978-0-387-74503-9, April.
    7. Fleten, Stein-Erik & Hoyland, Kjetil & Wallace, Stein W., 2002. "The performance of stochastic dynamic and fixed mix portfolio models," European Journal of Operational Research, Elsevier, vol. 140(1), pages 37-49, July.
    8. Philippe Artzner & Freddy Delbaen & Jean‐Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228, July.
    9. Yuichi Takano & Jun-ya Gotoh, 2011. "Constant Rebalanced Portfolio Optimization Under Nonlinear Transaction Costs," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 18(2), pages 191-211, May.
    10. Rockafellar, R. Tyrrell & Uryasev, Stanislav, 2002. "Conditional value-at-risk for general loss distributions," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1443-1471, July.
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    More about this item

    Keywords

    Multi-period portfolio optimization; Polynomial optimization problem; Constant rebalancing; Semidefinite programming; Mean-variance criterion;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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