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arXiv · 1812.00093

Using Column Generation to Solve Extensions to the Markowitz Model

Lorenz M. Roebers·Aras Selvi·Juan C. Vera
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Abstract

We introduce a solution scheme for portfolio optimization problems with cardinality constraints. Typical portfolio optimization problems are extensions of the classical Markowitz mean-variance portfolio optimization model. We solve such type of problems using a method similar to column generation. In this scheme, the original problem is restricted to a subset of the assets resulting in a master convex quadratic problem. Then the dual information of the master problem is used in a sub-problem to propose more assets to consider. We also consider other extensions to the Markowitz model to diversify the portfolio selection within the given intervals for active weights.

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Lorenz M. Roebers, Aras Selvi, Juan C. Vera. 2018-11-30. Using Column Generation to Solve Extensions to the Markowitz Model. https://arxiv.org/abs/1812.00093

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