The selection of a best element from some set of available alternatives. Typically consists of maximizing or minimizing a real function by systematically choosing input values from within an allowed set and computing the value of the function.

learn more… | top users | synonyms

1
vote
1answer
154 views

quadratic programming portfolio optimisation

I am using MATLAB to do an optimisation. The QP minimisation problem is set up in the standard form shown below. The optimisation is used to calculate the weights (x vector in the equation below) of a ...
1
vote
0answers
18 views

Standard errors clustered along the time dimension in pooled panel logit model

I'm trying to estimate a logit model on pooled panel data set (unit of observation is firm-year). My dependant variable is default indicator and I have several macro variables as independant ...
1
vote
0answers
36 views

Doubt on risk cost criterion

I want to minimize some kind of risk sensitive cost. But, I am confused what cost criterion should I use. I am aware of only expected exponential utility. I want to know what are the other such ...
1
vote
0answers
75 views

Max Likelihood via Marquardt Optimisation

I asked a related question here: How to apply Levenberg Marquardt to Max Likelihood Estimation I tried the approach suggested it works for some of the parameters but not the variances. I spoke to ...
1
vote
0answers
69 views

robust regions in grid search

I have a strategy f that takes parameters x,y (for x,y taking values in integer ranges). I get two grids (of returns and volatility values) from computing f(xi,yi) for integer ranges x1 <= xi <= ...
1
vote
0answers
43 views

How do I determine what is a separate objective in a multi-objective portfolio optimization?

Is there a general rule to determining when to separate objectives when developing a multi-objective portfolio optimization? For example, one might start with a standard portfolio optimization of ...
1
vote
0answers
532 views

portfolio optimization with a loop

I am attempting to minimize the variance of a 3 stock portfolio using optimization within a loop. What I have done is calculated the stock returns and cov matrix from dates 1980-01-01 to 1989-12-31 ...
1
vote
0answers
337 views

Call options portfolio: what would the underlyings' moments to be maximized?

Let you have only three underlyings, like SPY, TLT and GLD, and you want to buy $n_{1}$ Call options on SPY, $n_{2}$ Call options on TLT and $n_{3}$ Call options on GLD... with a limited budget, that ...
0
votes
1answer
31 views

optimization with absolute constraints

Suppose I have an optimization where I need to impose ADV-like constraint (for a case where Shorting is allowed): $\max \mu'w - \lambda w'\Sigma w$ $ |w| \le V $ $ Aw = 0$ and I want to use a ...
0
votes
1answer
231 views

Portfolio optimzation : efficient frontier with respect to risk aversion parameter with R

I am currently trying to write a little script in R to determine the optimal weights given a fixed risk aversion parameter. The problem I have is that by increasing the risk aversion parameter I think ...
0
votes
1answer
130 views

Parameters for numerically fitting t-distribution to log-returns

I am fitting the t-distribution to log-returns numerically (not using R, MATLAB, Stata, etc.), but rather using general programming. Assuming the log-return values are $r_t$, and the $t$-variates are ...
0
votes
1answer
37 views

Ledoit-Wolf Shrinkage estimator not giving positive definite covariance matrix

I used ten year daily data for 407 stocks and computed the daily and monthly covariance matrices. Since I have more variables than observations for the monthly matrix, I wasn't surprised to find the ...
0
votes
1answer
80 views

Asset Liability Management Test Topic Interpretation

I will write a test based on Excel and one of the topics is "The Asset Liability related analysis: including the input assumptions generation, constraints, portfolio optimization analysis and results ...
0
votes
1answer
89 views

Combining BHHH and Levenberg Marquardt

I already asked a question related to this here: How to apply Levenberg Marquardt to Max Likelihood Estimation I know understand how Levenberg Marquardt (LM) can be applied to the objective ...
0
votes
1answer
680 views

How do I do a mean variance optimization with constraints?

I am using python and the cvxopt library to calculate an efficient frontier, per the docs: http://cvxopt.org/examples/book/portfolio.html However, I cannot figure out how to add a constraint so that ...
0
votes
0answers
25 views

Smoothening yield curve by minimizing forward curve slope

I am using government bullet bond data and have bootstrapped a yield curve by solving the following optimization which minimizes unweighted price error: ...
0
votes
0answers
8 views

Is there any theoretical work to find an optimum size for the size of horizon in finite-horizon optimization or control?

we learn a lot about finite and infinite horizon control in dynamic programming. but I was wondering if we want to minimize the cost per time(discrete time) is there any work to find the optimum size ...
0
votes
0answers
43 views

How to compute the Coskewness Matrix in excel?

I'm triyng to compare two portfolio based on same sample of equities returns. And i want to know how to compute the coskewness matrix without using VBA, only in excel. Even a simple example with three ...
0
votes
0answers
27 views

scale alpha forecasts to align with covariance matrix

I have a set of monthly alpha forecasts and my covariance matrix has been annualized. I would like to do a mean variance optimization with a linear tcost penalty term. How do I rescale my alpha ...
0
votes
1answer
152 views
0
votes
0answers
42 views

Calculating the optimal portfolio for an investor with quadratic utility

The problem is from Asset Pricing and Portfolio Theory by Back and can be found here. The relevant info from section 2.5 can be found here. Given that we have the Expected value and the variance of ...
0
votes
0answers
16 views

dynamic programming with serially independent returns

Book suggests that "asset returns are assumed to be serially independent, so wealth is a single state connecting one period to the next". I understand path dependency is lost in case of serial ...
0
votes
0answers
662 views

Calculating the efficient frontier from expected returns and SD

I'm trying to calculate the efficient frontier (and the optimal portfolio at the Sharpe ratio) given two vectors for a portfolio: (1) expected returns and (2) historical standard deviations. I would ...
0
votes
0answers
65 views

Transform MPT optimization problem

I am trying to teach myself about MPT and optimization. I understand that MPT solutions can be found using three equivalent optimization problems: Minimizing variance for given return limit ...
0
votes
0answers
32 views

Approaches to check/validate the output of an optimization algorithm

Let's say we want to optimize the a function $f(x_1,\dots, x_n)$ with $(x_1, \dots , x_n) \in \mathbb{D}^n$. For the sake of simplicity let $\mathbb{D}^n$ be the unit sphere. We chose an optimization ...
-4
votes
2answers
154 views

Quadratic Programming Problem

How I can solve the following Quadratic Programming Problem: Min[X’VX+X’GX] In this case, X is a list of coefficient to be solved for, V is a square matrix of Price returns, and G is a square matrix ...