Portfolio Optimization with Trade Paring Constraints
14 Pages Posted: 27 Apr 2011
Date Written: February 9, 2011
Trade paring constraints enable portfolio managers to control the number of trades when constructing and rebalancing their portfolios. Allowing users to set trade paring constraints is a new feature in the Barra Optimizer (first available in Aegis 4.4 and also in Barra Open Optimizer 1.2). Portfolio optimization problems involving trade paring constraints are difficult to solve. In this paper, we show that the integrated trade paring approach in the Barra Optimizer, which consists of two innovative, intuitive and complementary heuristics, is viable and effective.
Keywords: Portfolio Optimization Trade Paring Constraints managers Portfolio Construction Optimization Investment Management Barra Aegis 4.4
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