Portfolio optimization involves the optimal assignment of limited capital to different available financial assets to achieve a reasonable trade-off between profit and risk. We consider an alternative Markowitz’s mean-variance model in which the variance is replaced with an industry standard risk measure, Value-atRisk (VaR), in order to better assess market risk exposure associated with financia...

In this paper, we examine the problem of finding an optimal portfolio of securities by using the probability function of portfolio risk as a constraint. We obtain the value of the risk coefficient for which the problem of maximizing the expectation of the portfolio return with a probabilistic risk function constraint is equivalent to the maximizing the linear convolution of the criteria ”expect...

Kelly's Criterion is well known among gamblers and investors as a method for maximizing the returns one would expect to observe over long periods of betting or investing. These ideas are conspicuously absent from portfolio optimization problems in the financial and automation literature. This paper will show how Kelly's Criterion can be incorporated into standard portfolio optimization models. ...

Value-at-Risk (VaR) is one of the most widely accepted risk measures in the financial and insurance industries, yet efficient optimization of VaR remains a very difficult problem. We propose a computationally tractable approximation method for minimizing the VaR of a portfolio based on robust optimization techniques. The method results in the optimization of a modified VaR measure, Asymmetry-Ro...

This paper examines the problem of choosing the optimal portfolio for an investor with asymmetric attitude to gains and losses described in the prospect theory of A. Tversky and D. Kahneman. We consider the portfolio optimization problem for an investor who follows the assumptions of the prospect theory and the cumulative prospect theory under conditions on the stochastic behavior both of the p...

The purpose of this paper is to propose a practical branch and bound algorithm for solving a class of long-short portfolio optimization problem with concave and d.c. transaction cost and complementarity conditions on the variables. We will show that this algorithm can solve a problem of practical size and that the longshort strategy leads to a portfolio with significantly better risk-return str...

One of the popular methods for optimizing combinational problems such as portfolio selection problem is swarmbased methods. In this paper, we have proposed an approach based on Quantum-Behaved Particle Swarm Optimization (QPSO) for the portfolio selection problem. The particle swarm optimization (PSO) is a well-known population-based swarm intelligence algorithm. QPSO is also proposed by combin...

We introduce a new methodology that incorporates advanced higher moments evaluation in a new approach of the Portfolio Selection problem, supported by effective Computational Intelligence models. The Evolutional Portfolio Optimization System (EPOS) extracts hidden patterns out of the numerous accounting data and financial statements filtering misguiding effects such as noise or fraud, offering ...

In this paper we present a framework, i.e. a concept and design as well as results with a prototypical implementation of a metaheuristic-based decision support system PM-DSS c © for portfolio optimization and managing investment guidelines. PM-DSS c © can be used for active as well as passive fund management. 1 The general problem In this paper we present a framework, i.e. a concept and design ...

Optimization refers to the minimization (or maximization) of an objective function of several decision variables that have to satisfy specified constraints. There are many applications of optimization. One example is the portfolio optimization problem where we seek the best way to invest some capital in a set of n assets. The constraints might represent a limit on the budget (i.e., a limit on t...