We construct an algorithm that makes it possible to numerically obtain an investor’s optimal portfolio under general preferences. In particular, the objective function and risks constraints may be driven by benchmarks (reflecting state-dependent preferences). We apply the algorithm to various classic optimal portfolio problems for which explicit solutions are available and show that our numerical solutions are compatible with them. This observation allows us to conclude that the algorithm can be trusted as a viable way to deal with portfolio optimisation problems for which explicit solutions are not in reach.

Original languageEnglish
Pages (from-to)1600-1621
Number of pages21
JournalJournal of the Operational Research Society
Issue number10
Publication statusPublished - 14 Jun 2019

    Research areas

  • algorithm, cost-efficiency, GOP, law-invariant, Optimal portfolio, state-dependent preferences

ID: 43968022