Heuristic Algorithm for Portfolio Selection with Minimum Transaction Lots
ABSTRACT: Portfolio selection
problem was first
formulated in a
paper written by
Markowitz, where investment diversification can
be translated into
computing. Mean-variance model
he introduced has been used and
developed because of it’s limitations in the larger constraints found in the
real world, as well as it’s computational complexity which found when it used
in large-scale portfolio. Quadratic
programming model complexity
given by Markowitz
has been overcome
with the development of
the algorithm research.
They introduce a
linear risk function
which solve the portfolio
selection problem with
real constraints, i.e.
minimum transaction lots.
With the Mixed Integer
Linear models, proposed
a new heuristic
algorithm that starts
from the solution
of the relaxation problems
which allow finding
close-to-optimal solutions. This
algorithm is built
on Mixed Integer Linear
Programming (MILP) which
formulated using nearest
integer search method.
Key words:
MILP, heuristics, portfolio
optimization, minimum transaction
lots, nearest integer search
Author: Afnaria, Herman
Mawengkang
Journal Code: jppendidikangg130059
