25 Dec

Optimising and Constraining Portfolio Distances

or Goldilocks and the three little pigs

Main points:

  • fundamental fund managers are unlikely to be satisfied with either portfolio optimization or reverse optimization
  • they might have the idea of an ideal portfolio
  • we canĀ  minimize the distance from the ideal portfolio to a portfolio that satisfies all constraints
  • There may or may not be a use for series of random trades that start and end with specified weights

annotated slides (pdf)

Presented 2010 June at the London Quant Group.

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