Article ID: | iaor200916827 |
Country: | United States |
Volume: | 19 |
Issue: | 2 |
Start Page Number: | 239 |
End Page Number: | 247 |
Publication Date: | Apr 2007 |
Journal: | INFORMS Journal On Computing |
Authors: | Rustem Ber, Parpas Panos |
Keywords: | financial |
We consider decomposition approaches for the solution of multistage stochastic programs that appear in financial applications. In particular, we discuss the performance of two algorithms that we test on the mean–variance portfolio optimization problem. The first algorithm is based on a regularized version of Benders decomposition, and we discuss its extension to the quadratic case. The second algorithm is an augmented Lagrangian method. Our results indicate that the algorithm based on regularized Benders decomposition is more efficient, which is in line with similar studies performed in the linear setting.