Computation of mean-semivariance efficient sets by the Critical Line Algorithm
The general mean-semivariance portfolio optimization problem seeks to determine the efficient frontier by solving a parametric non-quadratic programming problem. In this paper it is shown how to transform this problem into a general mean-variance optimization problem, hence the Critical Line Algorithm is applicable. This paper also discusses how to implement the critical line algorithm to save storage and reduce execution time.
KeywordsMean-variance efficient frontier mean-semivariance efficient frontier historical returns Critical Line Algorithm
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