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Optimal portfolio choice with benchmarks

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Abstract
We construct an algorithm that makes it possible to numerically obtain an investor’s optimal portfolio under general preferences. In particular, the objective function and risks constraints may be driven by benchmarks (reflecting state-dependent preferences). We apply the algorithm to various classic optimal portfolio problems for which explicit solutions are available and show that our numerical solutions are compatible with them. This observation allows us to conclude that the algorithm can be trusted as a viable way to deal with portfolio optimisation problems for which explicit solutions are not in reach.
Keywords
optimal portfolio, algorithm, law-invariant, GOP, cost-efficiency, state-dependent preferences

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Citation

Please use this url to cite or link to this publication:

Chicago
Bernard, Carole, Rob De Staelen, and Steven Vanduffel. 2019. “Optimal Portfolio Choice with Benchmarks.” Journal of the Operational Research Society.
APA
Bernard, C., De Staelen, R., & Vanduffel, S. (2019). Optimal portfolio choice with benchmarks. JOURNAL OF THE OPERATIONAL RESEARCH SOCIETY.
Vancouver
1.
Bernard C, De Staelen R, Vanduffel S. Optimal portfolio choice with benchmarks. JOURNAL OF THE OPERATIONAL RESEARCH SOCIETY. Informa UK Limited; 2019;
MLA
Bernard, Carole, Rob De Staelen, and Steven Vanduffel. “Optimal Portfolio Choice with Benchmarks.” JOURNAL OF THE OPERATIONAL RESEARCH SOCIETY (2019): n. pag. Print.
@article{8569207,
  abstract     = {We construct an algorithm that makes it possible to numerically obtain an investor{\textquoteright}s optimal portfolio under general preferences. In particular, the objective function and risks constraints may be driven by benchmarks (reflecting state-dependent preferences). We apply the algorithm to various classic optimal portfolio problems for which explicit solutions are available and show that our numerical solutions are compatible with them. This observation allows us to conclude that the algorithm can be trusted as a viable way to deal with portfolio optimisation problems for which explicit solutions are not in reach.},
  author       = {Bernard, Carole and De Staelen, Rob and Vanduffel, Steven},
  issn         = {0160-5682},
  journal      = {JOURNAL OF THE OPERATIONAL RESEARCH SOCIETY},
  language     = {eng},
  publisher    = {Informa UK Limited},
  title        = {Optimal portfolio choice with benchmarks},
  url          = {http://dx.doi.org/10.1080/01605682.2018.1470066},
  year         = {2019},
}

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