2023
DOI: 10.1142/s1793830923500210
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A penalty decomposition algorithm for the extended mean–variance–CVaR portfolio optimization problem

Abstract: In this paper, we study mean–variance–Conditional Value-at-Risk (CVaR) portfolio optimization problem with short selling, cardinality constraint and transaction costs. To tackle its mixed-integer quadratic optimization model for large number of scenarios, we take advantage of the penalty decomposition method (PDM). It needs solving a quadratic optimization problem and a mixed-integer linear program at each iteration, where the later one has explicit optimal solution. The convergence of PDM to a partial minimum… Show more

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Cited by 1 publication
(1 citation statement)
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“…Despite the extensive literature on solving similar, yet simpler, problems [20], [21], [22], [23], [24], [25], [26], [27], [28], [11], [29], [30], the only approach for handling (P ) suggests to apply the following semidefinite (SDP) relaxation [13]:…”
Section: Introductionmentioning
confidence: 99%
“…Despite the extensive literature on solving similar, yet simpler, problems [20], [21], [22], [23], [24], [25], [26], [27], [28], [11], [29], [30], the only approach for handling (P ) suggests to apply the following semidefinite (SDP) relaxation [13]:…”
Section: Introductionmentioning
confidence: 99%