y v.vassiliadis@fme.aegean.gr z g.dounias@aegean.gr This paper considers the task of forming a portfolio of assets that outperforms a benchmark index, while imposing a constraint on the tracking error volatility. We examine three alternative formulations of active portfolio management. The¯rst one is a typical setup in which the fund manager myopically maximizes excess return. The second formulation is an attempt to set a limit on the total risk exposure of the portfolio by adding a constraint that forces a priori the risk of the portfolio to be equal to the benchmark's. In this paper, we also propose a third formulation that directly maximizes the e±ciency of active portfolios, while setting a limit on the maximum tracking error variance. In determining optimal active portfolios, we incorporate additional constraints on the optimization problem, such as a limit on the maximum number of assets included in the portfolio (i.e. the cardinality of the portfolio) as well as upper and lower bounds on asset weights. From a computational point of view, the incorporation of these complex, though realistic, constraints becomes a challenge for traditional numerical optimization methods, especially when one has to assemble a portfolio from a big universe of assets. To deal * We are thankful to the two anonymous referees for their valuable comments and suggestions.New Mathematics and Natural Computation Vol. 5, No. 3 (2009) 535À555 # . c World Scienti¯c Publishing Company 535 New Math. and Nat. Computation 2009.05:535-555. Downloaded from www.worldscientific.com by UNIVERSITY OF QUEENSLAND on 08/15/15. For personal use only.properly with the complexity and the \roughness" of the solution space, we use particle swarm optimization, a population-based evolutionary technique. As an empirical application of the methodology, we select portfolios of di®erent cardinality that actively reproduce the performance of the FTSE/ATHEX 20 Index of the Athens Stock Exchange. Our empirical study reveals important results concerning the e±ciency of common practices in active portfolio management and the incorporation of cardinality constraints.

This paper addresses the modeling and optimization of resource availability in car parks, serving different priority classes of customers. The authors examine various formulations of the problem concerning two general objectives: a) increasing the availability for high priority customers and b) maximizing the aggregate service level. In the current context, priority classes are specified according to different space reservation options provided by the parking management company (monthly parking, hourly parking, parking on demand, etc.). Based on actual historical traffic data and under certain methodological assumptions, they calculate the arrival and service rates for each class of customers. These are subsequently used as inputs in a Markov model that describes the evolution of the number of free parking spaces in time, given that some spaces are reserved for higher priority classes. Optimization techniques and OR heuristics are applied to deal with numerical aspects of the associated reservation planning issues.

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Purpose -The purpose of this paper is to examine volatility transmissions between portfolios of cross-listed equities and exchange rate differences and also the volatility persistence for home, foreign equities, and exchange rate differences in the UK and German markets. Design/methodology/approach -A primary focus of this paper is to see if there is an impact first on the volatility persistence for foreign equities that are listed in the UK and German markets, second on the respective home portfolios of cross-listed equities, and third on the exchange rate differences. In addition, whether there are any bilateral spillovers between the following equity portfolios: foreign cross-listed equities, home cross-listed equities, and also local or global exchange rate differences are investigated. Findings -The paper finds that the volatility persistence is more prominent than error persistence from cross-listed equities, foreign or home, and the exchange rate differences. Furthermore, the transmission mechanism indicates a bilateral integration process in some of the cases that were examined. Based on these results, it is concluded that in the UK market the foreign cross-listings affect less the domestic equities compared to the German market. Originality/value -This paper examines the interdependence of portfolios of home and foreign equities for cross-listings that belong to the same stock exchange with two exchange rates, a local and a global one in order to provide more evidence in this area of literature.

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