Optimising and Constraining Portfolio Distances
or Goldilocks and the three little pigs
Main points:
- fundamental fund managers are unlikely to be satisfied with either portfolio optimization or reverse optimization
- they might have the idea of an ideal portfolio
- we can minimize the distance from the ideal portfolio to a portfolio that satisfies all constraints
- There may or may not be a use for series of random trades that start and end with specified weights
Presented 2010 June at the London Quant Group.
