Article ID Journal Published Year Pages File Type
477708 European Journal of Operational Research 2008 10 Pages PDF
Abstract

A portfolio problem with integer variables can facilitate the use of complex models, including models containing discrete asset values, transaction costs, and logical constraints. This study proposes a distributed algorithm for solving a portfolio program to obtain a global optimum. For a portfolio problem with n integer variables, the objective function first is converted into an ellipse function containing n separated quadratic terms. Next, the problem is decomposed into m equal-size separable programming problems solvable by a distributed computation system composed of m personal computers linked via the Internet. The numerical examples illustrate that the proposed method can obtain the global optimum effectively for large scale portfolio problems involving integral variables.

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