TY - JOUR

T1 - Integer programming approaches in mean-risk models

AU - Konno, Hiroshi

AU - Yamamoto, Rei

N1 - Funding Information:
Acknowledgements. The research of the first author was supported in part by Grant-in-Aid for Scientific Research of the Ministry of Education, Science, Culture, Sports and Technology B(2) 15310122 and 15656025.

PY - 2005/11

Y1 - 2005/11

N2 - 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.

AB - 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.

KW - Integer constraints

KW - Integer programming

KW - Mean-absolute deviation model

KW - Portfolio optimization

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U2 - 10.1007/s10287-005-0038-9

DO - 10.1007/s10287-005-0038-9

M3 - Article

AN - SCOPUS:27644465300

SN - 1619-697X

VL - 2

SP - 339

EP - 351

JO - Computational Management Science

JF - Computational Management Science

IS - 4

ER -