A distributed computation algorithm for solving portfolio problems with integer variables |
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Authors: | Han-Lin Li Jung-Fa Tsai |
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Institution: | 1. Institute of Information Management, National Chiao Tung University, 1001 Ta Hsueh Rd., Hsinchu 300, Taiwan;2. Department of Business Management, National Taipei University of Technology, 1 Sec. 3, Chung Hsiao E. Rd., Taipei 106, Taiwan |
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Abstract: | A portfolio problem with integer variables can facilitate the use of complex models, including models containing discrete asset values, transaction costs, and logical constraints. This study proposes a distributed algorithm for solving a portfolio program to obtain a global optimum. For a portfolio problem with n integer variables, the objective function first is converted into an ellipse function containing n separated quadratic terms. Next, the problem is decomposed into m equal-size separable programming problems solvable by a distributed computation system composed of m personal computers linked via the Internet. The numerical examples illustrate that the proposed method can obtain the global optimum effectively for large scale portfolio problems involving integral variables. |
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Keywords: | Finance Portfolio Quadratic integer program Convex |
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