A recursive procedure for selecting optimal portfolio according to the MAD model

• Autorzy: Michałowski W. , Ogryczak W.
• Języki publikacji: EN

Abstrakty

EN

The mathematical model of portfolio optimization is usually represented as a bicriteria optimization problem where a reasonable trade-off between expected rate of return and risk is sought. Im a classical Markowitz model the risk is measured by a variance, thus resulting in a quadratic programming model. As an alternative, the MAD model was proposed where risk is measured by (mean) absolute deviation instead of a variance. The MAD model is computationally attractive, since it is transformed into an easy to solve linear programming program. In this paper we poesent a recursive procedure which allows to identify optimal portfolio of the MAD model depending on investor's downside risk aversion.

Słowa kluczowe

EN

downside risk aversion; investment; linear programming; portfolio optimization; quadratic programming; risk management

PL

optymalizacja; programowanie liniowe

• Wydawca: Systems Research Institute, Polish Academy of Sciences
• Czasopismo: Control and Cybernetics
• Rocznik: 1999
• Tom: Vol. 28, no 4
• Strony: 725--738
• Opis fizyczny: Bibliogr. 21 poz.,

Twórcy

autor

Michałowski W.

autor

Ogryczak W.

• International Institute for Applied Systems Analysis, DAS Project, Laxenvburg, A-2361, Austria