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A polynomial optimization approach to constant rebalanced portfolio selection

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  • Yuichi Takano

    ()

  • Renata Sotirov

    ()

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

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File URL: http://hdl.handle.net/10.1007/s10589-011-9436-9
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Bibliographic Info

Article provided by Springer in its journal Computational Optimization and Applications.

Volume (Year): 52 (2012)
Issue (Month): 3 (July)
Pages: 645-666

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Handle: RePEc:spr:coopap:v:52:y:2012:i:3:p:645-666

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Web page: http://www.springer.com/math/journal/10589

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Related research

Keywords: Multi-period portfolio optimization; Polynomial optimization problem; Constant rebalancing; Semidefinite programming; Mean-variance criterion;

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  1. Hibiki, Norio, 2006. "Multi-period stochastic optimization models for dynamic asset allocation," Journal of Banking & Finance, Elsevier, vol. 30(2), pages 365-390, February.
  2. 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.
  3. Philippe Artzner & Freddy Delbaen & Jean-Marc Eber & David Heath, 1999. "Coherent Measures of Risk," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 203-228.
  4. Luenberger, David G., 1997. "Investment Science," OUP Catalogue, Oxford University Press, number 9780195108095, September.
  5. 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.
  6. 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.
  7. Yuichi Takano & Jun-ya Gotoh, 2011. "Constant Rebalanced Portfolio Optimization Under Nonlinear Transaction Costs," Asia-Pacific Financial Markets, Springer, vol. 18(2), pages 191-211, May.
  8. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
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