Portfolio Optimization

Risk parity portfolio

Portfolio optimization stands as a cornerstone of modern investment management, focusing on the systematic selection of optimal asset allocations that balance expected returns against financial risk. Since Harry Markowitz’s groundbreaking 1952 paper on Portfolio Selection, for which he later received the Nobel Prize in Economic Sciences, the field has evolved significantly beyond the traditional mean-variance framework. While the fundamental principle of optimizing portfolios based on the dual objectives of maximizing returns and minimizing risk remains central, practitioners have developed sophisticated approaches that account for real-world complexities such as transaction costs, market volatility, and diverse investment constraints. Modern portfolio optimization encompasses various methodologies, from robust optimization and alternative risk measures to factor models and machine learning approaches, all aimed at creating more resilient and efficient investment strategies that can adapt to changing market conditions and investor preferences.

Software

GitHub software webpage

Books



Papers