Tangency portfolios in the LP solvable portfolio selection models
RAIRO - Operations Research - Recherche Opérationnelle, Volume 46 (2012) no. 2, pp. 149-158.

A risk measure in a portfolio selection problem is linear programming (LP) solvable, if it has a linear formulation when the asset returns are represented by discrete random variables, i.e., they are defined by their realizations under specified scenarios. The efficient frontier corresponding to an LP solvable model is a piecewise linear curve. In this paper we describe a method which realizes and produces a tangency portfolio as a by-product during the procedure of tracing out of the efficient frontier of risky assets in an LP solvable model, when our portfolio contains some risky assets and a riskless asset, using nonsmooth optimization methods. We show that the test of finding the tangency portfolio can be limited only for two portfolios. Also, we describe that how this method can be employed to trace out the efficient frontier corresponding to a portfolio selection problem in the presence of a riskless asset.

DOI: 10.1051/ro/2012012
Classification: 90C05, 90C29
Keywords: linear programming, lp solvable portfolio selection models, subgradient, tangency portfolio, Aneja-Nair method
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     title = {Tangency portfolios in the {LP} solvable portfolio selection models},
     journal = {RAIRO - Operations Research - Recherche Op\'erationnelle},
     pages = {149--158},
     publisher = {EDP-Sciences},
     volume = {46},
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     url = {http://archive.numdam.org/articles/10.1051/ro/2012012/}
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Keykhaei, Reza; Jahandideh, Mohamad Taghi. Tangency portfolios in the LP solvable portfolio selection models. RAIRO - Operations Research - Recherche Opérationnelle, Volume 46 (2012) no. 2, pp. 149-158. doi : 10.1051/ro/2012012. http://archive.numdam.org/articles/10.1051/ro/2012012/

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