Red Hat Summit12.18. Investment asset class allocation (Portfolio Optimization)
Decide the relative quantity to invest in each asset class.
Hard constraints:
Risk maximum: the total standard deviation must not be higher than the standard deviation maximum.
- Total standard deviation calculation takes asset class correlations into account by applying Markowitz Portfolio Theory.
- Region maximum: Each region has a quantity maximum.
- Sector maximum: Each sector has a quantity maximum.
Soft constraints:
- Maximize expected return.
Problem size
de_smet_1 has 1 regions, 3 sectors and 11 asset classes with a search space of 10^4.
irrinki_1 has 2 regions, 3 sectors and 6 asset classes with a search space of 10^3.Larger datasets have not been created or tested yet, but should not pose a problem. A good source of data is this Asset Correlation website.
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