Method and system for portfolio optimization from ordering information
OwnerRobert Almgren, Neil Chrissinventors
Life of this patent
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Abstract
A method of optimizing a portfolio includes selecting an investment universe with a finite number of assets, forming a belief matrix based on one or more homogeneous inequality relationships among the expected returns of assets in the universe, selecting those asset returns that are consistent with the belief matrix to form a consistent set of return vectors, selecting a set of allowable weight vectors for the assets in the universe, determining a centroid vector of the consistent set of return vectors with respect to a probability measure, and finding an optimal portfolio by finding a weight vector on a boundary of the set of allowable weight vectors that maximizes an inner product with the centroid vector.
Claims36
A program storage device readable by a computer, tangibly embodying a program of instructions executable by the computer to perform the method steps for optimizing a portfolio, said method comprising the steps of:
- providing an investment universe with a finite number of assets;
- forming a belief matrix from one or more relationships among the expected returns of assets in the universe;
- selecting those asset returns that are consistent with the belief matrix to form a consistent set of return vectors;
- determining a set of allowable weight vectors for the assets in the universe;
- determining a centroid vector of the consistent set of return vectors with respect to a probability measure;
- and
- finding an optimal portfolio by finding a weight vector in the set of allowable weight vectors that maximizes an inner product with the centroid vector.
A method for optimizing a portfolio, said method comprising the steps of:
- receiving a criteria for providing an investment universe with a finite number of assets, and selecting said investment universe;
- receiving a set of beliefs concerning the expected returns of assets in the universe and forming a belief matrix from said beliefs;
- selecting those asset returns that are consistent with the belief matrix to form a consistent set of return vectors;
- determining a set of allowable weight vectors for the assets in the universe;
- determining a centroid vector of the consistent set of return vectors with respect to a probability measure;
- and
- finding an optimal portfolio by finding a weight vector in the set of allowable weight vectors that maximizes an inner product with the centroid vector.
A program storage device readable by a computer, tangibly embodying a program of instructions executable by the computer to perform the method steps for optimizing a portfolio, said method comprising the steps of:
- providing an investment universe with a finite number of assets;
- forming a belief matrix from one or more homogeneous inequality relationships among the expected returns of assets in the universe;
- selecting those asset returns that are consistent with the belief matrix to form a consistent set of return vectors;
- and
- determining a centroid vector of the consistent set of return vectors with respect to a probability measure.
Dependencies are inferred from the claim text.