Journal ArticleDOI
Models and Simulations for Portfolio Rebalancing
TLDR
In this paper, the optimal portfolio selection problem in a multi-period framework is studied by considering fixed and proportional transaction costs and evaluating how much they affect a re-investment strategy.Abstract:
In 1950 Markowitz first formalized the portfolio optimization problem in terms of mean return and variance. Since then, the mean-variance model has played a crucial role in single-period portfolio optimization theory and practice. In this paper we study the optimal portfolio selection problem in a multi-period framework, by considering fixed and proportional transaction costs and evaluating how much they affect a re-investment strategy. Specifically, we modify the single-period portfolio optimization model, based on the Conditional Value at Risk (CVaR) as measure of risk, to introduce portfolio rebalancing. The aim is to provide investors and financial institutions with an effective tool to better exploit new information made available by the market. We then suggest a procedure to use the proposed optimization model in a multi-period framework. Extensive computational results based on different historical data sets from German Stock Exchange Market (XETRA) are presented.read more
Citations
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Journal ArticleDOI
Twenty years of linear programming based portfolio optimization
TL;DR: This paper reviews the variety of LP solvable portfolio optimization models presented in the literature, the real features that have been modeled and the solution approaches to the resulting models, in most of the cases mixed integer linear programming (MILP) models.
Journal ArticleDOI
Portfolio rebalancing with an investment horizon and transaction costs
TL;DR: In this paper, the authors consider the problem of rebalancing an existing financial portfolio, where transaction costs have to be paid if we change the amount held of any asset, and they model the problem as a mixed-integer quadratic program with an explicit constraint on the amount that can be paid in transaction cost.
Posted Content
Portfolio Optimization
TL;DR: In this paper, the authors used portfolio optimization techniques to determine the most favorable investment portfolio in particular stock indices of three companies, namely Microsoft Corporation, Christian Dior Fashion House and Shevron Corporation.
Journal ArticleDOI
A heuristic framework for the bi-objective enhanced index tracking problem
TL;DR: A bi-objective Mixed Integer Linear Programming formulation for the enhanced index tracking problem where two competing objectives are taken into consideration, and a heuristic procedure is designed to build an approximation of the set of Pareto optimal solutions.
Journal ArticleDOI
Robust portfolio optimization with a hybrid heuristic algorithm
Björn Fastrich,Peter Winker +1 more
TL;DR: In order to eliminate oversimplifications of Markowitz’ portfolio theory, the optimization framework is generalized to better emulate a more realistic investment environment and a hybrid heuristic is employed to tackle the adjusted optimization problem.
References
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Journal ArticleDOI
Coherent Measures of Risk
TL;DR: In this paper, the authors present and justify a set of four desirable properties for measures of risk, and call the measures satisfying these properties "coherent", and demonstrate the universality of scenario-based methods for providing coherent measures.
Journal ArticleDOI
Portfolio Selection: Efficient Diversification of Investments
Alan Stuart,Harry M. Markowitz +1 more
TL;DR: In this article, the authors defined asset classes technology sector stocks will diminish as the construction of the portfolio, and the construction diversification among the, same level of assets, which is right for instance among the assets.
Journal ArticleDOI
Optimization of conditional value-at-risk
R. T. Rockafellar,S Uryasev +1 more
TL;DR: In this paper, a new approach to optimize or hedging a portfolio of financial instruments to reduce risk is presented and tested on applications, which focuses on minimizing Conditional Value-at-Risk (CVaR) rather than minimizing Value at Risk (VaR), but portfolios with low CVaR necessarily have low VaR as well.
Book
Portfolio Selection: Efficient Diversification of Investments
TL;DR: In this paper, the authors apply modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors, such as hedge fund managers, hedge funds, and hedge funds.
Journal ArticleDOI
Mean-absolute deviation portfolio optimization model and its applications to Tokyo stock market
Hiroshi Konno,Hiroaki Yamazaki +1 more
TL;DR: In this article, a portfolio optimization model using the L1 risk (mean absolute deviation risk) function can remove most of the difficulties associated with the classical Markowitz's model while maintaining its advantages over equilibrium models.
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