Download This PaperFast Quadratic Programming for Mean-Variance Portfolio Optimization
21 Pages Posted: 22 May 2020 Last revised: 21 Aug 2020
Date Written: April 27, 2020
Abstract
In this paper, a vectorized quadratic convex optimization algorithm based on Matlab's quadprog built-in function is proposed. We target specifically a classic problem confronted by portfolio analysts, that of optimizing asset allocation when choosing among several asset classes, in the context of Markowitz's modern portfolio theory. Simulating return trajectories for several asset classes, we formulate the optimization routine in such a way that is able to handle multiple scenarios at the same time, instead of on a one-by-one basis, reducing computational times significantly, without introducing observable estimation errors. A sensitivity analysis is offered with respect to the optimal batch size.
Keywords: Quadratic programming, Vectorization, Portfolio Optimization, Algorithmic efficiency
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