Portfolio optimization with entropy measure


16th IASTED International Conference on Applied Simulation and Modelling, Palma de Mallorca, Spain, 29 - 31 August 2007, pp.26-27 identifier identifier

  • Publication Type: Conference Paper / Full Text
  • City: Palma de Mallorca
  • Country: Spain
  • Page Numbers: pp.26-27
  • Keywords: portfolio selection, optimization, maximum entropy (MaxEnt) principle
  • Anadolu University Affiliated: Yes


In portfolio management, the selection of portfolio weights has received considerable interest. Considering the expected return, risk and uncertainty, the portfolio distribution is to be determined. The maximum entropy (MaxEnt) principle is one of the efficient methods to find distribution of random variables. Thus, in this study, the maximum entropy (MaxEnt) principle is presented as an alternative method of determination of portfolios distribution. Beside, a numerical example is also presented to illustrate this principle.