An efficient DC programming approach for portfolio decision with higher moments |
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Authors: | Tao Pham Dinh Yi-Shuai Niu |
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Institution: | 1.Laboratory of Mathematics,National Institute for Applied Sciences,Rouen,France |
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Abstract: | Portfolio selection with higher moments is a NP-hard nonconvex polynomial optimization problem. In this paper, we propose
an efficient local optimization approach based on DC (Difference of Convex functions) programming—called DCA (DC Algorithm)—that
consists of solving the nonconvex program by a sequence of convex ones. DCA will construct, in each iteration, a suitable
convex quadratic subproblem which can be easily solved by explicit method, due to the proposed special DC decomposition. Computational
results show that DCA almost always converges to global optimal solutions while comparing with the global optimization methods
(Gloptipoly, Branch-and-Bound) and it outperforms several standard local optimization algorithms. |
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Keywords: | |
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