25 Dec

Portfolio Optimisation Inside Out

Main points:

  • Usually in portfolio optimization the utility is primary and constraints secondary
  • We get a useful point of view if we put constraints primary and utility secondary
  • random portfolios give us this point of view
  • one way of generating random portfolios is outlined
  • constraining fractions of portfolio variance per asset is a good alternative to weight constraints

annotated slides (pdf)

Presented 2011 December at the Computational and Financial Econometrics conference.

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