A Continuous Optimization Approach for the Financial Portfolio Selection under Discrete Asset Choice Constraints
arXiv:1404.3286
Abstract
In this paper we consider a generalization of the Markowitz's Mean-Variance model under linear transaction costs and cardinality constraints. The cardinality constraints are used to limit the number of assets in the optimal portfolio. The generalized model is formulated as a mixed integer quadratic programming (MIP) problem. The purpose of this paper is to investigate a continuous approach based on difference of convex functions (DC) programming for solving the MIP model. The preliminary comparative results of the proposed approach versus CPLEX are presented.
Proceedings of the 12th International Symposium on Operational Research (SOR'2013), Slovenia, September 2013, pp. 89-95, (2013)