Producing the tangency portfolio as a corner portfolio

Reza Keykhaei; Mohamad-Taghi Jahandideh

RAIRO - Operations Research - Recherche Opérationnelle (2013)

  • Volume: 47, Issue: 3, page 311-320
  • ISSN: 0399-0559

Abstract

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One-fund theorem states that an efficient portfolio in a Mean-Variance (M-V) portfolio selection problem for a set of some risky assets and a riskless asset can be represented by a combination of a unique risky fund (tangency portfolio) and the riskless asset. In this paper, we introduce a method for which the tangency portfolio can be produced as a corner portfolio. So, the tangency portfolio can be computed easily and fast by any algorithm designed for tracing out the M-V efficient frontier via computing the corner portfolios. Moreover, we show that how this method can be used for tracing out the M-V efficient frontier when problem contains a riskless asset in which the borrowing is not allowed.

How to cite

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Keykhaei, Reza, and Jahandideh, Mohamad-Taghi. "Producing the tangency portfolio as a corner portfolio." RAIRO - Operations Research - Recherche Opérationnelle 47.3 (2013): 311-320. <http://eudml.org/doc/275019>.

@article{Keykhaei2013,
abstract = {One-fund theorem states that an efficient portfolio in a Mean-Variance (M-V) portfolio selection problem for a set of some risky assets and a riskless asset can be represented by a combination of a unique risky fund (tangency portfolio) and the riskless asset. In this paper, we introduce a method for which the tangency portfolio can be produced as a corner portfolio. So, the tangency portfolio can be computed easily and fast by any algorithm designed for tracing out the M-V efficient frontier via computing the corner portfolios. Moreover, we show that how this method can be used for tracing out the M-V efficient frontier when problem contains a riskless asset in which the borrowing is not allowed.},
author = {Keykhaei, Reza, Jahandideh, Mohamad-Taghi},
journal = {RAIRO - Operations Research - Recherche Opérationnelle},
keywords = {M-V optimization; parametric quadratic programming; critical line algorithm; capital allocation line; tangency portfolio; mean-variance optimization},
language = {eng},
number = {3},
pages = {311-320},
publisher = {EDP-Sciences},
title = {Producing the tangency portfolio as a corner portfolio},
url = {http://eudml.org/doc/275019},
volume = {47},
year = {2013},
}

TY - JOUR
AU - Keykhaei, Reza
AU - Jahandideh, Mohamad-Taghi
TI - Producing the tangency portfolio as a corner portfolio
JO - RAIRO - Operations Research - Recherche Opérationnelle
PY - 2013
PB - EDP-Sciences
VL - 47
IS - 3
SP - 311
EP - 320
AB - One-fund theorem states that an efficient portfolio in a Mean-Variance (M-V) portfolio selection problem for a set of some risky assets and a riskless asset can be represented by a combination of a unique risky fund (tangency portfolio) and the riskless asset. In this paper, we introduce a method for which the tangency portfolio can be produced as a corner portfolio. So, the tangency portfolio can be computed easily and fast by any algorithm designed for tracing out the M-V efficient frontier via computing the corner portfolios. Moreover, we show that how this method can be used for tracing out the M-V efficient frontier when problem contains a riskless asset in which the borrowing is not allowed.
LA - eng
KW - M-V optimization; parametric quadratic programming; critical line algorithm; capital allocation line; tangency portfolio; mean-variance optimization
UR - http://eudml.org/doc/275019
ER -

References

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