Simulated Annealing for Complex Portfolio Selection Problems

Y. Crama and M. Schyns

Liege - Groupe d'Etude des Mathematiques du Management et de l'Economie from UNIVERSITE DE LIEGE, Faculte d'economie, de gestion et de sciences sociales, Groupe d'Etude des Mathematiques du Management et de l'Economie

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.

Keywords: SIMULATION; FINANCIAL MARKET; ECONOMIC MODELS (search for similar items in EconPapers)
JEL-codes: C53 G11 (search for similar items in EconPapers)
Pages: 33 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:fth:gemame:9911

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