Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
481657 | European Journal of Operational Research | 2008 | 28 Pages |
Abstract
In this paper we consider a portfolio optimization problem where the underlying asset returns are distributed as a mixture of two multivariate Gaussians; these two Gaussians may be associated with “distressed” and “tranquil” market regimes. In this context, the Sharpe ratio needs to be replaced by other non-linear objective functions which, in the case of many underlying assets, lead to optimization problems which cannot be easily solved with standard techniques. We obtain a geometric characterization of efficient portfolios, which reduces the complexity of the portfolio optimization problem.
Keywords
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Ian Buckley, David Saunders, Luis Seco,