Portfolio Optimization
One of the earliest approaches for portfolio optimization has been mean variance approach using Sharpe ratio. However, since the introduction of this approach, several other optimizations have been tried, particularly with VaR or CVaR as measures of risk.
Portfolio optimization can use different criteria for the optimization of the portfolio, including optimization based with linear and fixed transaction costs, conditional value at risk, conditional value at risk with constraints optimization, marginal cost of risk based optimization, and mean variance approach. What method one uses depends upon the priorities and requirements of an institution.
