Simulated annealing for complex portfolio selection problems

Simulated annealing for complex portfolio selection problems

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Article ID: iaor20043153
Country: Netherlands
Volume: 150
Issue: 3
Start Page Number: 546
End Page Number: 571
Publication Date: Nov 2003
Journal: European Journal of Operational Research
Authors: ,
Keywords: programming: quadratic
Abstract:

This paper describes the application of a simulated annealing approach to the solution of a complex portfolio selection model. The model is a mixed integer quadratic programming problem which arises when Markowitz' classical mean-variance model is enriched with additional realistic constraints. Exact optimization algorithms run into difficulties in this framework and this motivates the investigation of heuristic techniques. Computational experiments indicate that the approach is promising for this class of problems.

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