REU 2005 – Portfolio Optimization with Non-Smooth Constraints

This project develops a portfolio optimization algorithm tailored to the special structure provided by constraints on the sum of the absolute values of the positions; a book size constraint. The program generates the efficient frontier by scanning for corner portfolios, using the fact that optimal portfolios must satisfy a combination of equations (for each stock which is not zero) and inclusions (for each stock that is not in the solution).