Sat, 19 Jul 2008 05:17:53 BST CiteULike: pdlug's optimization http://www.citeulike.org/user/pdlug/tag/optimization CiteULike.org en-gb Copyright © 2004-2008 citeulike.org http://www.citeulike.org/user/pdlug/article/2939124 <i>(3 Apr 2008)</i><br /><br />It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio cannot be optimized under any coherent measure on that sample, and the risk measure diverges to minus infinity. This instability was first discovered on the special example of Expected Shortfall which is used here both as an illustration and as a prompt for generalization. Feasibility of Portfolio Optimization under Coherent Risk Measures Imre Kondor Istvan Varga-Haszonits (3 Apr 2008) 2008-06-28T12:18:14-00:00 2008 finance optimization portfolio risk http://www.citeulike.org/user/pdlug/article/2716638 <i>Journal of Portfolio Management, (1992), pp. 7-19.</i><br /><br />It is widely agreed that asset allocation accounts for a large part of the variability in the return on a typical investor's portfolio. This is especially true if the overall portfolio is invested in multiple funds, each including a number of securities. Asset allocation is generally defined as the allocation of an investor's portfolio among a number of "major" asset classes. Clearly such a generalization cannot be made operational without defining such classes. Once a set of asset classes has been defined, it is important to determine the exposures of each component of an investor's overall portfolio to movements in their returns. Such information can be aggregated to determine the investor's overall effective asset mix. If it does not conform to the desired mix, appropriate alterations can then be made. Once a procedure for measuring exposures to variations in returns of major asset classes is in place, it is possible to determine how effectively individual fund managers have performed their functions and the extent (if any) to which value has been added through active management. Finally, the effectiveness of the investor's overall asset allocation can be compared with that of one or more benchmark asset mixes. An effective way to accomplish all these tasks is to use an asset class factor model. After describing the characteristics of such a model, we illustrate applications of a model with twelve asset classes to analyze the performance of a set of open-end mutual funds between 1985 and 1989. Asset Allocation: Management Style and Performance Measurement William Sharpe Journal of Portfolio Management, (1992), pp. 7-19. 2008-04-25T04:08:31-00:00 1992 Journal of Portfolio Management, 7 19 asset finance optimization portfolio http://www.citeulike.org/user/pdlug/article/2716633 <i>Annals of Operations Research, Vol. 152, No. 1. (July 2007), pp. 376-394.</i><br /><br />We consider the problem of portfolio selection, with transaction costs and constraints on exposure to risk. Linear transaction costs, bounds on the variance of the return, and bounds on different shortfall probabilities are efficiently handled by convex optimization methods. For such problems, the globally optimal portfolio can be computed very rapidly. Portfolio optimization problems with transaction costs that include a fixed fee, or discount breakpoints, cannot be directly solved by convex optimization. We describe a relaxation method which yields an easily computable upper bound via convex optimization. We also describe a heuristic method for finding a suboptimal portfolio, which is based on solving a small number of convex optimization problems (and hence can be done efficiently). Thus, we produce a suboptimal solution, and also an upper bound on the optimal solution. Numerical experiments suggest that for practical problems the gap between the two is small, even for large problems involving hundreds of assets. The same approach can be used for related problems, such as that of tracking an index with a portfolio consisting of a small number of assets. Portfolio Optimization with Linear and Fixed Transaction Costs M Lobo M Fazel S Boyd Annals of Operations Research, Vol. 152, No. 1. (July 2007), pp. 376-394. 2008-04-25T04:06:02-00:00 2007 Annals of Operations Research 152 1 376 394 finance optimization portfolio http://www.citeulike.org/user/pdlug/article/1604967 <i>(2001)</i><br /><br />We consider the execution of portfolio transactions with the aim of minimizing a combination of volatility risk and transaction costs arising from permanent and temporary market impact. For a simple linear cost model, we explicitly construct the efficient frontier in the space of time-dependent liquidation strategies, which have minimum expected cost for a given level of uncertainty. This analysis yields a number we call the "half-life" of a trade, the natural time for execution in the absence... Optimal Execution of Portfolio Transactions R Almgren N Chriss (2001) 2007-08-29T15:23:06-00:00 2001 economics finance markets optimization portfolio transactions http://www.citeulike.org/user/pdlug/article/2142460 <i>(17 Dec 2007)</i><br /><br />We investigate the use of Kelly's strategy in the construction of an optimal portfolio of assets. With asset prices undergoing a multiplicative random process, we derive approximate analytical results for the optimal investment fractions under various constraints. We show that, when returns and volatilities of the assets are small and borrowing is forbidden, the Kelly-optimal portfolio lies on Markowitz Efficient Frontier. When short positions are also forbidden, only a small fraction of the available assets is included in the Kelly-optimal portfolio. This phenomenon, that we call condensation, is explored in detail. Analysis of Kelly-optimal portfolios Paolo Laureti Matus Medo Yi-Cheng Zhang (17 Dec 2007) 2007-12-18T20:34:40-00:00 2007 finance kelly mean optimization portfolio statistics variance http://www.citeulike.org/user/pdlug/article/2086868 <i></i><br /><br />In this paper we present robust models for index tracking and active portfolio management. The goal of these models is to control the e#ect of statistical errors in estimating market parameters on the performance of the portfolio. The proposed models allow one to impose additional side constraints such as bounds on the portfolio holdings, constraints on the portfolio beta, limits on cash exposure, etc. The optimal portfolios are computed by solving second-order cone programs. Since the... Robust Portfolio Management E Erdogan D Goldfarb G Iyengar 2007-12-10T21:35:04-00:00 asset economics finance index management optimization portfolio statistics tracking http://www.citeulike.org/user/pdlug/article/625999 <i></i><br /><br />In this paper we show how to formulate and solve robust portfolio selection problems. The objective of these robust formulations is to systematically combat the sensitivity of the optimal portfolio to statistical and modeling errors in the estimates of the relevant market parameters. We introduce "uncertainty structures" for the market parameters and show that the robust portfolio selection problems corresponding to these uncertainty structures can be reformulated as second-order cone programs... Robust portfolio selection problems G Iyengar D Goldfarb 2006-05-13T09:26:08-00:00 estimation finance math mathematics optimization portfolio robust statistics http://www.citeulike.org/user/pdlug/article/1528010 <i>Computer Methods in Applied Mechanics and Engineering, Vol. 196, No. 33-34. (1 July 2007), pp. 3190-3218.</i><br /><br />This paper reviews the state-of-the-art in robust design optimization - the search for designs and solutions which are immune with respect to production tolerances, parameter drifts during operation time, model sensitivities and others. Starting with a short glimps of Taguchi's robust design methodology, a detailed survey of approaches to robust optimization is presented. This includes a detailed discussion on how to account for design uncertainties and how to measure robustness (i.e., how to evaluate robustness). The main focus will be on the different approaches to perform robust optimization in practice including the methods of mathematical programming, deterministic nonlinear optimization, and direct search methods such as stochastic approximation and evolutionary computation. It discusses the strengths and weaknesses of the different methods, thus, providing a basis for guiding the engineer to the most appropriate techniques. It also addresses performance aspects and test scenarios for direct robust optimization techniques. Robust optimization - A comprehensive survey Hans-Georg Beyer Bernhard Sendhoff doi:10.1016/j.cma.2007.03.003 Computer Methods in Applied Mechanics and Engineering, Vol. 196, No. 33-34. (1 July 2007), pp. 3190-3218. 2007-08-01T16:01:00-00:00 2007 Computer Methods in Applied Mechanics and Engineering 196 33-34 3190 3218 linearalgebra linearprogramming optimization quadratic survey http://www.citeulike.org/user/pdlug/article/571949 <i>The Journal of Finance, Vol. 7, No. 1. (1952), pp. 77-91.</i> Portfolio Selection Harry Markowitz doi:10.2307/2975974 The Journal of Finance, Vol. 7, No. 1. (1952), pp. 77-91. 2006-03-31T18:40:42-00:00 1952 The Journal of Finance 7 1 77 91 economics finance optimization portfolio http://www.citeulike.org/user/pdlug/article/1176646 <i>(27 April 2005)</i><br /><br />Modern portfolio theory produces an optimal portfolio from estimates of expected returns and a covariance matrix. We present a method for portfolio optimization based on replacing expected returns with ordering information, that is, with information about the order of the expected returns. We give a simple and economically rational definition of optimal portfolios that extends Markowitz' meanvariance optimality condition in a natural way; in particular, our construction allows full use of covariance information. We also provide efficient numerical algorithms. The formulation we develop is very general and is easily extended to a variety of cases, for example, where assets are divided into multiple sectors or there are multiple sorting criteria available. Portfolios from Sorts Neil Chriss Robert Almgren (27 April 2005) 2007-03-19T21:39:57-00:00 2005 economics finance optimization portfolio http://www.citeulike.org/user/pdlug/article/976853 <i>Journal of Risk (December 2004)</i><br /><br />Modern portfolio theory produces an optimal portfolio from estimates of expected returns and a covariance matrix. We present a method for portfolio optimization based on replacing expected returns with ordering information, that is, with information about the order of the expected returns. We give a simple and economically rational definition of optimal portfolios that extends Markowitz' meanvariance optimality condition in a natural way; in particular, our construction allows full use of covariance information. We also provide efficient numerical algorithms. The formulation we develop is very general and is easily extended to a variety of cases, for example, where assets are divided into multiple sectors or there are multiple sorting criteria available. Optimal Portfolios from Ordering Information Robert Almgren Neil Chriss Journal of Risk (December 2004) 2006-12-06T14:53:00-00:00 2004 Journal of Risk economics finance optimization portfolio