Portfolio optimization is a formal mathematical approach to making investment decisions across a collection of financial instruments or assets. The classical approach, known as modern portfolio theory (MPT), involves categorizing the investment universe based on risk (standard deviation) and return, and then choosing the mix of investments that achieve a desired risk versus return tradeoff.

Common steps in optimizing portfolios include:

Estimating asset return and total return moments from price or return data

Performing constrained mean-variance,conditional value-at-risk, and mean-absolute-deviation optimization

Examining the time evolution of efficient portfolio allocations

For more information, seeMATLAB®andFinancial Toolbox™.

See also:portfolio optimization and analysis,Financial Toolbox,Optimization Toolbox,Global Optimization Toolbox,Black-Litterman model,portfolio optimization videos,smart beta

Choose a web site to get translated content where available and see local events and offers. Based on your location, we recommend that you select:.

You can also select a web site from the following list:

Select the China site (in Chinese or English) for best site performance. Other MathWorks country sites are not optimized for visits from your location.

Accelerating the pace of engineering and science

MathWorks is the leading developer of mathematical computing software for engineers and scientists.