### Abstract

This paper is concerned with an optimization problem associated with a rebalancing schedule of a large scale fund subject to nonconvex transaction cost. We will formulate this problem as a 0-1 mixed integer programming problem under linear constraints using absolute deviation as the measure of risk. This problem can be solved by an integer programming software if the size of the universe is small. However, it is still beyond the reach of the state-of-the-art technology to solve a large scale rebalancing problem. We will show that we can now solve these problems almost exactly within a practical amount of time by using an elaborate heuristic approach.

Original language | English |
---|---|

Pages (from-to) | 26-37 |

Number of pages | 12 |

Journal | Journal of the Operations Research Society of Japan |

Volume | 56 |

Issue number | 1 |

DOIs | |

Publication status | Published - 2013 Jan 1 |

Externally published | Yes |

### Fingerprint

### Keywords

- 0-1 Integer programming
- Absolute deviation
- Finance
- Gradual rebalance
- Market impact cost
- Rebalance schedule
- Transaction cost

### ASJC Scopus subject areas

- Decision Sciences(all)
- Management Science and Operations Research

### Cite this

**Rebalance schedule optimization of a large scale portfolio under transaction cost.** / Yamamoto, Rei; Konno, Hiroshi.

Research output: Contribution to journal › Article

*Journal of the Operations Research Society of Japan*, vol. 56, no. 1, pp. 26-37. https://doi.org/10.15807/jorsj.56.26

}

TY - JOUR

T1 - Rebalance schedule optimization of a large scale portfolio under transaction cost

AU - Yamamoto, Rei

AU - Konno, Hiroshi

PY - 2013/1/1

Y1 - 2013/1/1

N2 - This paper is concerned with an optimization problem associated with a rebalancing schedule of a large scale fund subject to nonconvex transaction cost. We will formulate this problem as a 0-1 mixed integer programming problem under linear constraints using absolute deviation as the measure of risk. This problem can be solved by an integer programming software if the size of the universe is small. However, it is still beyond the reach of the state-of-the-art technology to solve a large scale rebalancing problem. We will show that we can now solve these problems almost exactly within a practical amount of time by using an elaborate heuristic approach.

AB - This paper is concerned with an optimization problem associated with a rebalancing schedule of a large scale fund subject to nonconvex transaction cost. We will formulate this problem as a 0-1 mixed integer programming problem under linear constraints using absolute deviation as the measure of risk. This problem can be solved by an integer programming software if the size of the universe is small. However, it is still beyond the reach of the state-of-the-art technology to solve a large scale rebalancing problem. We will show that we can now solve these problems almost exactly within a practical amount of time by using an elaborate heuristic approach.

KW - 0-1 Integer programming

KW - Absolute deviation

KW - Finance

KW - Gradual rebalance

KW - Market impact cost

KW - Rebalance schedule

KW - Transaction cost

UR - http://www.scopus.com/inward/record.url?scp=84982103097&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84982103097&partnerID=8YFLogxK

U2 - 10.15807/jorsj.56.26

DO - 10.15807/jorsj.56.26

M3 - Article

AN - SCOPUS:84982103097

VL - 56

SP - 26

EP - 37

JO - Journal of the Operations Research Society of Japan

JF - Journal of the Operations Research Society of Japan

SN - 0453-4514

IS - 1

ER -