MATLAB: Limited number of Assets in a universe, with constraints.

assetconstraintsFinancial Toolboxlinear inequalitiesoptimisationportconsportfolio

Hi,

I was wondering if someone could help me regarding portfolio construction and constraints.

Linear inequalities are quite straigtforward, however I cannot figure out how to limit the number of asset selected.

Building constraints, if I get 10 columns each representing an asset, is there a way to specify that the asset weight can only be 0 or between 0.2 and 0.5? (which would limit the number of asset to be selected)

Thank you

Best Answer

You could solve the 2^10 separate problems corresponding to the different combinations of assets, each time deleting the corresponding columns from your problem data.

2^10 is not such a big number to loop over.

Related Solutions

MATLAB: How to limit the number of assets selected in working with Portfolio objects

You will need to manually sort your assets. You can then select the best 50, or however many you would like, using one of the following methods:

1) If you want a long portfolio, you can sort the assets based on the expected returns and pick the 50 highest.

2) If you want to short portfolio then you can sort and select the 50 assets with the highest negative returns.

3) If you want to select the top 50 assets that deliver the best value for a custom criteria, you can use the Optimization Toolbox directly to create a model with constraint to the number of assets in the portfolio. There is an example you can follow in the documentation:

https://www.mathworks.com/help/optim/examples/mixed-integer-quadratic-programming-portfolio-optimization.html

MATLAB: Efficient portfolios constraints, how can I add a particular constraint

The first constraint is easy to implement.

ConSet = protcons('PortValue', 1, NumAssets, 'AssetLims', -1, AssetMax)

where NumAssets is the number of assets and AssetMax is a vector with the upper boundary for the portoflio weights.

The two other constraints are a bit of a problem. You cannot order the optimizing function to use only a certain amount of assets. So there is no Matlab function for your problem. If your number of assets is small you could loop through all possible combinations of assets, optimize a portfolio and chosse the portfolio with the highest return for a certain amount of risk. Afterwards yoou repeat that process for the other portfolios of your efficient frontier, but you omit certain assets (according to your third constraint).

Best Answer

Related Solutions

MATLAB: How to limit the number of assets selected in working with Portfolio objects

MATLAB: Efficient portfolios constraints, how can I add a particular constraint

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