Bond portfolio optimization problems and their applications to index tracking: A partial optimization approach

Abstract

We will discuss exact and efficient parametric simplex algorithms for solving a class of nonconvex minimization problems associated with bond portfolio optimization models which one of authors proposed in the late 1980's. We will show that globally optimal solutions of both total and partial optimization problems can now be calculated on a real time basis. Also we will present some computational results of a partial optimization model applied to a tracking of an index portfolio.