Stochastic linear knapsack programming problem and its application to a portfolio selection problem (Q1119471)
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English | Stochastic linear knapsack programming problem and its application to a portfolio selection problem |
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Stochastic linear knapsack programming problem and its application to a portfolio selection problem (English)
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1989
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The linear knapsack problem with random multinormal cost coefficients is reduced to the maximization of the probability that the total return exceeds a given level subject to the original simple constraints. The probability assumptions, namely, the special block-diagonal shape of the variance matrix of the cost coefficients, help to decompose the equivalence deterministic problem into simple parametric quadratic subprograms and a master problem - a convex nondifferentiable knapsack problem of lower dimension - that can be solved by a modified simple ranking method. The proposed algorithm is applied to the portfolio selection problem.
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linear knapsack problem
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random multinormal cost coefficients
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parametric quadratic subprograms
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ranking method
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portfolio selection
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