We investigate the use of Bregman iteration method for the solution of the portfolio selection problem, both in the single and in the multi-period case. Our starting point is the classical Markowitz mean-variance model, properly extended to deal with the multi-period case. The constrained optimization problem at the core of the model is typically ill-conditioned, due to correlation between assets. We consider l1-regularization techniques to stabilize the solution process, since this has also relevant financial interpretations.
Numerical solution of the regularized portfolio selection problem
Stefania Corsaro
;Zelda Marino;Francesca Perla
2018-01-01
Abstract
We investigate the use of Bregman iteration method for the solution of the portfolio selection problem, both in the single and in the multi-period case. Our starting point is the classical Markowitz mean-variance model, properly extended to deal with the multi-period case. The constrained optimization problem at the core of the model is typically ill-conditioned, due to correlation between assets. We consider l1-regularization techniques to stabilize the solution process, since this has also relevant financial interpretations.File in questo prodotto:
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