Distributed Optimisation of a Portfolio's Omega

Parallel Computing, Vol. 36, No. 7, pp. 381-389, 2010

Swiss Finance Institute Research Paper No. 08 - 17

20 Pages Posted: 8 Jul 2008 Last revised: 22 Jul 2011

See all articles by Manfred Gilli

Manfred Gilli

University of Geneva - Research Center for Statistics; Swiss Finance Institute

Enrico Schumann

Independent

Date Written: July 7, 2008

Abstract

We investigate portfolio selection with alternative objective functions in a distributed computing environment. In particular, we optimise a portfolio's 'Omega' which is the ratio of two partial moments of the returns distributions. Since finding optimal portfolios under such performance measures and realistic constraints leads to non-convex problems, we suggest to solve the problem with a heuristic method called Threshold Accepting (TA). TA is a very flexible technique as it requires no simplifications of the problem and allows for a straightforward implementation of all kinds of constraints. Applying this algorithm to actual data, we find that TA is well-adapted to optimisation problems of this type. Furthermore, we show that the computations can easily be distributed which leads to considerable speedups.

Keywords: Optimization heuristics, Threshold Accepting, Portfolio Optimization

JEL Classification: C61, C63, G11

Suggested Citation

Gilli, Manfred and Schumann, Enrico, Distributed Optimisation of a Portfolio's Omega (July 7, 2008). Parallel Computing, Vol. 36, No. 7, pp. 381-389, 2010; Swiss Finance Institute Research Paper No. 08 - 17. Available at SSRN: https://ssrn.com/abstract=1156355 or http://dx.doi.org/10.2139/ssrn.1156355

Manfred Gilli (Contact Author)

University of Geneva - Research Center for Statistics ( email )

Geneva
Switzerland
+41223798222 (Phone)
+41223798299 (Fax)

HOME PAGE: http://www.unige.ch/ses/metri/gilli/

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Enrico Schumann

Independent ( email )

No Address Available

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