Portfolio Optimization

206 Sharpe Rat io s Under Constraints and Kinks Chap. 9

PQPSolver can both solve problems of this form provided the budget

constraint is included in the problem being solved. The key issue is

that the matrices H

j

are nonsingular. See Exercise 9.2.

The MATLAB code to find the entire efficient frontier using PQP-

Solver is shown in Figure 9.5. The results of running it are summarized

in Table 9.3. In addition, the corner portfolios, their expected returns

and variances a r e shown in Table 9.4.

TABLE 9.3 Piecewise Linear, Optimal Solution for Example 9.3

and Associated Efficient Frontier Parameters

j 0 1 2 3 4 5

t

j

0 0.0714 0.1071 0.33 0.6500 1.15

K

j

{6} {2, 6}