Integer programming approaches in mean-risk models

Hiroshi Konno and Rei Yamamoto

Computational Management Science, 2005, vol. 4, issue 4, 339-351

Abstract: This paper is concerned with porfolio optimization problems with integer constraints. Such problems include, among others mean-risk problems with nonconvex transaction cost, minimal transaction unit constraints and cardinality constraints on the number of assets in a portfolio. These problems, though practically very important have been considered intractable because we have to solve nonlinear integer programming problems for which there exists no efficient algorithms. We will show that these problems can now be solved by the state- of-the-art integer programming methodologies if we use absolute deviation as the measure of risk. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Portfolio optimization; mean-absolute deviation model; integer constraints; integer programming (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s10287-005-0038-9

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