Name
Title | ||
|---|---|---|
Cutting plane algorithms for mean-CVaR portfolio optimization with nonconvex transaction costs |
Abstract | ||
|---|---|---|
This paper studies the mean-risk portfolio optimization problem with nonconvex transaction costs. We employ the conditional value-at-risk (CVaR) as a risk measure. There are a number of studies that aim at efficiently solving large-scale CVaR minimization problems. None of these studies, however, take into account nonconvex transaction costs, which are present in practical situations. To make a piecewise linear approximation of the transaction cost function, we utilized special ordered set type two constraints. Moreover, we devised a subgradient-based cutting plane algorithm to handle a large number of scenarios. This cutting plane algorithm needs to solve a mixed integer linear programming problem in each iteration, and this requires a substantial computation time. Thus, we also devised a two-phase cutting plane algorithm that is even more efficient. Numerical experiments demonstrated that our algorithms can attain near-optimal solutions to large-scale problems in a reasonable amount of time. Especially when rebalancing a current portfolio that is close to an optimal one, our algorithms considerably outperform other solution methods. |
Year | DOI | Venue |
|---|---|---|
2015 | 10.1007/s10287-014-0209-7 | Comput. Manag. Science |
Keywords | Field | DocType |
portfolio optimization,conditional value at risk,transaction costs | Mathematical optimization,Subgradient method,Portfolio optimization,Integer programming,Minification,Risk measure,Mathematics,Expected shortfall,Special ordered set,CVAR | Journal |
Volume | Issue | ISSN |
12 | 2 | 1619-6988 |
Citations | PageRank | References |
1 | 0.37 | 13 |
Authors | ||
4 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Yuichi Takano | 1 | 41 | 6.35 |
| keisuke nanjo | 2 | 1 | 0.37 |
| Noriyoshi Sukegawa | 3 | 28 | 6.41 |
| Shinji Mizuno | 4 | 792 | 153.37 |