A branch-and-bound algorithm for discrete multi-factor portfolio optimization model

  • Niu Shu-fen  (牛淑芬)
  • Wang Guo-xin  (王国欣)
  • Sun Xiao-ling  (孙小玲)
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Abstract

In this paper, a new branch-and-bound algorithm based on the Lagrangian dual relaxation and continuous relaxation is proposed for discrete multi-factor portfolio selection model with roundlot restriction in financial optimization. This discrete portfolio model is of integer quadratic programming problems. The separable structure of the model is investigated by using Lagrangian relaxation and dual search. Computational results show that the algorithm is capable of solving real-world portfolio problems with data from US stock market and randomly generated test problems with up to 120 securities.

Keywords

portfolio optimization discrete multi-factor model Lagrangian relaxation and continuous relaxation branch-and-bound method 

2000 Mathematics Subject Classification

62P05 90C11 91B28 
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Copyright information

© Shanghai University 2008

Authors and Affiliations

  • Niu Shu-fen  (牛淑芬)
    • 1
  • Wang Guo-xin  (王国欣)
    • 1
  • Sun Xiao-ling  (孙小玲)
    • 1
  1. 1.Department of Mathematics, College of SciencesShanghai UniversityShanghaiP. R. China

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