-

 

 

 




Optimization Online





 

A Global Optimization Problem in Portfolio Selection

Michael Bartholomew-Biggs (matqmb***at***herts.ac.uk)
Stephen Kane (matqsjk***at***herts.ac.uk)

Abstract: This paper deals with the issue of buy-in thresholds in portfolio optimization using the Markowitz approach. Optimal values of invested fractions calculated using, for instance, the classical minimum-risk problem can be unsatisfactory in practice because they imply that very small amounts of certain assets are purchased. Realistically, we want to impose a disjoint restriction so that each invested fraction is either zero or exceeds a prescribed minimum threshold. We shall describe an approach which uses a combination of local and global optimization to determine satisfactory solutions. The approach could also be applied to other disjoint conditions - for instance in dealing with assets that can only be purchased in units of a certain size (roundlots).

Keywords: Global Optimization; Portfolio Selection

Category 1: Applications -- OR and Management Sciences (Finance and Economics )

Category 2: Global Optimization (Applications )

Citation: TR 335, Numerical Optimization Centre, University of Hertfordshire, Hatfield, UK

Download: [PDF]

Entry Submitted: 06/25/2004
Entry Accepted: 06/25/2004
Entry Last Modified: 06/25/2004

Modify/Update this entry


  Visitors Authors More about us Links
  Subscribe, Unsubscribe
Digest Archive
Search, Browse the Repository

 

Submit
Update
Policies
Coordinator's Board
Classification Scheme
Credits
Give us feedback
Optimization Journals, Sites, Societies
Mathematical Programming Society