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Portfolio optimization is the process of selecting an optimal portfolio (asset distribution), out of a set of considered portfolios, according to some objective.The objective typically maximizes factors such as expected return, and minimizes costs like financial risk, resulting in a multi-objective optimization problem.
Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk.
Pooling is the grouping together of assets, and related strategies for minimizing risk. For example: Asset-backed securities (ABS) is a security whose income payments are backed by a specified pool of underlying assets. Mortgage-backed securities (MBS) is a type of asset-backed security whereas the underlying assets are mortgages.
Basic asset allocation strategies tend to follow a few simple concepts: When you're young, it makes sense to take an aggressive approach, because you have a long time horizon and therefore can ...
In addition to the context of efficiency in allocation, the concept of Pareto efficiency also arises in the context of efficiency in production vs. x-inefficiency: a set of outputs of goods is Pareto-efficient if there is no feasible re-allocation of productive inputs such that output of one product increases while the outputs of all other ...
Banker's algorithm is a resource allocation and deadlock avoidance algorithm developed by Edsger Dijkstra that tests for safety by simulating the allocation of predetermined maximum possible amounts of all resources, and then makes an "s-state" check to test for possible deadlock conditions for all other pending activities, before deciding whether allocation should be allowed to continue.
In economics, the field of public finance deals with three broad areas: macroeconomic stabilization, the distribution of income and wealth, and the allocation of resources. . Much of the study of the allocation of resources is devoted to finding the conditions under which particular mechanisms of resource allocation lead to Pareto efficient outcomes, in which no party's situation can be ...
Optimization-based methods aim to attain, for each instance, an allocation that is "as fair as possible" for this instance. An allocation is "fair" if = for all agents i; in this case, we say that the "unfairness" of the allocation is 0. If this equality is violated, one can define a measure of "total unfairness", and try to minimize it.