AIMMS - Investment Portfolio Selection

Description

In this example the strategic portfolio selection model has been implemented. It models how top management could spread an overall budget over several investment categories. Once their budget allocation becomes available, tactical investment decisions at the next decision level must be made concerning individual securities within each investment category. Such a two-phase approach supports hierarchical decision making which is typical in large financial institutions.

The model can be extended with a cost budget. In this case, there are non-linear costs associated with the investments. The total cost cannot exceed the cost budget. The model becomes a MINLP, which can be solved with AOA (GMP) and BARON (if available).

Keywords

Mathematical Derivation, Mathematical Reformulation, Parametric Curve, Bar Chart

Industries

Services & Government

Model Types

Mixed Integer Nonlinear Programming

References

Chapter 18 - A Portfolio Selection Problem in the Optimization Modeling Guide

Download AIMMS Example

You can download an AIMMS example dealing with this problem via the link below, and run it after installing the AIMMS software. If you don't have an AIMMS license yet, you can download a free license of AIMMS.

ftp://ftp.aimms.com/pub/Download/Examples/Investment Portfolio Selection.aimmspack

Please make sure to save this file including the .aimmspack extension so that it can be opened by AIMMS.

This example application is a simplification of reality. Please do not hesitate to contact us to discuss how AIMMS enables you to build a complete optimization application that captures the full complexity of your problem.

Screenshot AIMMS Example

Investment Portfolio Selection