Portfolio Optimisation Inside Out

Main points:

• Usually in portfolio optimization the utility is primary and constraints secondary
• We get a useful point of view if we put constraints primary and utility secondary
• random portfolios give us this point of view
• one way of generating random portfolios is outlined
• constraining fractions of portfolio variance per asset is a good alternative to weight constraints

annotated slides (pdf)

Presented 2011 December at the Computational and Financial Econometrics conference.