An exact algorithm for factor model in portfolio selection with roundlot constraints

X.L. Sun; S.F. Niu; D. Li

doi:10.1080/02331930902741747

An exact algorithm for factor model in portfolio selection with roundlot constraints

X.L. Sun^*, S.F. Niu, D. Li

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

1 Citation (Scopus)

Abstract

We consider in this article a factor model in portfolio selection with roundlot constraints. Mathematically, this model leads to a quadratic integer programming problem. We exploit the separable structure of the model in order to derive Lagrangian bounds. A branch-and-bound algorithm based on Lagrangian relaxation and continuous relaxation is then developed for solving this model. Computational results are reported for test problems with up to 150 securities.

Original language	English
Pages (from-to)	305-318
Journal	Optimization
Volume	58
Issue number	3
Online published	18 Mar 2009
DOIs	https://doi.org/10.1080/02331930902741747
Publication status	Published - Apr 2009
Externally published	Yes

Research Keywords

Branch-and-bound method
Continuous relaxation
Factor model
Lagrangian relaxation
Portfolio optimization
Roundlot constraints

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10.1080/02331930902741747

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title = "An exact algorithm for factor model in portfolio selection with roundlot constraints",

abstract = "We consider in this article a factor model in portfolio selection with roundlot constraints. Mathematically, this model leads to a quadratic integer programming problem. We exploit the separable structure of the model in order to derive Lagrangian bounds. A branch-and-bound algorithm based on Lagrangian relaxation and continuous relaxation is then developed for solving this model. Computational results are reported for test problems with up to 150 securities.",

keywords = "Branch-and-bound method, Continuous relaxation, Factor model, Lagrangian relaxation, Portfolio optimization, Roundlot constraints",

author = "X.L. Sun and S.F. Niu and D. Li",

year = "2009",

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doi = "10.1080/02331930902741747",

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T1 - An exact algorithm for factor model in portfolio selection with roundlot constraints

AU - Sun, X.L.

AU - Niu, S.F.

AU - Li, D.

PY - 2009/4

Y1 - 2009/4

N2 - We consider in this article a factor model in portfolio selection with roundlot constraints. Mathematically, this model leads to a quadratic integer programming problem. We exploit the separable structure of the model in order to derive Lagrangian bounds. A branch-and-bound algorithm based on Lagrangian relaxation and continuous relaxation is then developed for solving this model. Computational results are reported for test problems with up to 150 securities.

AB - We consider in this article a factor model in portfolio selection with roundlot constraints. Mathematically, this model leads to a quadratic integer programming problem. We exploit the separable structure of the model in order to derive Lagrangian bounds. A branch-and-bound algorithm based on Lagrangian relaxation and continuous relaxation is then developed for solving this model. Computational results are reported for test problems with up to 150 securities.

KW - Branch-and-bound method

KW - Continuous relaxation

KW - Factor model

KW - Lagrangian relaxation

KW - Portfolio optimization

KW - Roundlot constraints

UR - http://www.scopus.com/inward/record.url?scp=70449398271&partnerID=8YFLogxK

UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-70449398271&origin=recordpage

U2 - 10.1080/02331930902741747

DO - 10.1080/02331930902741747

M3 - RGC 21 - Publication in refereed journal

SN - 0233-1934

VL - 58

SP - 305

EP - 318

JO - Optimization

JF - Optimization

IS - 3

ER -

An exact algorithm for factor model in portfolio selection with roundlot constraints

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Research Keywords

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