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The Mean-Variance-CVaR model for Portfolio OptimizationModeling using a Multi-Objective Approach Based on a Hybrid Method

Published online by Cambridge University Press:  26 August 2010

A. Taik ,
R. Aboulaich ,
R. Ellaia  and
S. El Moumen
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Abstract

In this paper we present a new hybrid method, called SASP method. We propose thehybridization of two methods, the simulated annealing (SA), which belong to the class ofglobal optimization based on the principles of thermodynamics, and the descent method werewe estimate the gradient using the simultaneous perturbation. This hybrid method givesbetter results. We use the Normal Boundary Intersection approach (NBI) based on the SASPmethod to solve a portfolio optimization problem. Such problem is a multi-objectiveoptimization problem, in order to solve this problem we use three statistical quantities:the expected value, the variance and the Conditional Value-at-Risk (CVaR). The purpose ofthis work is to find the efficient boundary of the considered multi-objective problemusing the NBI method based on the SASP method

Keywords

CVaRmulti-objective optimizationNBI methodhybrid method SASPsimultaneous perturbationsimulated annealing

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