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Introduction

In: Advanced Portfolio Optimization

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  • Dany Cajas

    (Orenji EIRL)

Abstract

The portfolio optimization process consists of selecting the best asset allocation or combination of assets that best suit investor needs. To determine the optimal portfolio, investors usually have two options: heuristics and quantitative models. Heuristics are not based on theoretical models or require sophisticated mathematical knowledge like the 1 ∕ N $$1/N$$ portfolio that assigns the same weight to all assets or the 60 ∕ 40 $$60/40$$ portfolio that invests 60 % $$60\%$$ in equities and 40 % $$40\%$$ in bonds. The main disadvantage of heuristics is that they do not produce an optimal asset allocation that suits investor needs. On the other hand, quantitative models require a more advanced mathematical knowledge, but they can be customized in order to suit investor needs.

Suggested Citation

  • Dany Cajas, 2025. "Introduction," Springer Books, in: Advanced Portfolio Optimization, chapter 0, pages 1-8, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-84304-4_1
    DOI: 10.1007/978-3-031-84304-4_1
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