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Global Optimization of the Scenario Generation and Portfolio Selection Problems

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Computational Science and Its Applications - ICCSA 2006 (ICCSA 2006)

Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 3982))

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Abstract

We consider the global optimization of two problems arising from financial applications. The first problem originates from the portfolio selection problem when high-order moments are taken into account. The second issue we address is the problem of scenario generation. Both problems are non-convex, large-scale, and highly relevant in financial engineering. For the two problems we consider, we apply a new stochastic global optimization algorithm that has been developed specifically for this class of problems. The algorithm is an extension to the constrained case of the so called diffusion algorithm. We discuss how a financial planning model (of realistic size) can be solved to global optimality using a stochastic algorithm. Initial numerical results are given that show the feasibility of the proposed approach.

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Author information

Authors and Affiliations

  1. Department of Computing, Imperial College, London, SW7 2AZ

    Panos Parpas & Berç Rustem

Authors
  1. Panos Parpas
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  2. Berç Rustem
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Editor information

Editors and Affiliations

  1. Department of Computer Science, University of Calgary, 2500 University Drive N.W., T2N 1N4, Calgary, AB, Canada

    Marina Gavrilova

  2. Department of Mathematics and Computer Science, University of Perugia, via Vanvitelli, 1, I-06123, Perugia, Italy

    Osvaldo Gervasi

  3. William Norris Professor, Head of the Computer Science and Engineering Department, University of Minnesota, USA

    Vipin Kumar

  4. OptimaNumerics Ltd., Cathedral House, 23-31 Waring Street, BT1 2DX, Belfast, UK

    C. J. Kenneth Tan

  5. Clayton School of IT, Monash University, 3800, Clayton, Australia

    David Taniar

  6. Department of Chemistry, University of Perugia, Via Elce di Sotto, 8, I-06123, Perugia, Italy

    Antonio Laganá

  7. School of Computing, Soongsil University, Seoul, Korea

    Youngsong Mun

  8. School of Information and Communication Engineering, Sungkyunkwan University, Korea

    Hyunseung Choo

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© 2006 Springer-Verlag Berlin Heidelberg

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Parpas, P., Rustem, B. (2006). Global Optimization of the Scenario Generation and Portfolio Selection Problems. In: Gavrilova, M., et al. Computational Science and Its Applications - ICCSA 2006. ICCSA 2006. Lecture Notes in Computer Science, vol 3982. Springer, Berlin, Heidelberg. https://doi.org/10.1007/11751595_95

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  • DOI: https://doi.org/10.1007/11751595_95

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-34075-1

  • Online ISBN: 978-3-540-34076-8

  • eBook Packages: Computer ScienceComputer Science (R0)

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