A penalty decomposition algorithm for the extended mean-variance-CVaR portfolio optimization problem
Author | Hamdi, A. |
Author | Khodamoradi, T. |
Author | Salahi, M. |
Available date | 2023-09-24T07:55:30Z |
Publication Date | 2023 |
Publication Name | Discrete Mathematics, Algorithms and Applications |
Resource | Scopus |
Abstract | In this paper, we study mean-variance-Conditional Value-At-Risk (CVaR) portfolio optimization problem with short selling, cardinality constraint and transaction costs. To tackle its mixed-integer quadratic optimization model for large number of scenarios, we take advantage of the penalty decomposition method (PDM). It needs solving a quadratic optimization problem and a mixed-integer linear program at each iteration, where the later one has explicit optimal solution. The convergence of PDM to a partial minimum of original problem is proved. Finally, numerical experiments using the S&P index for 2020 are conducted to evaluate efficiency of the proposed algorithm in terms of return, variance and CVaR gaps and CPU times. 2023 World Scientific Publishing Company. |
Language | en |
Publisher | World Scientific |
Subject | cardinality constraint Mean-variance-CVaR model penalty decomposition method short selling transaction costs |
Type | Article |
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