Advanced Modeling and Optimization

Abstract for Paper 1 of Volume 4, Number 1, 2002, pp. 3-12

Impact on the efficient frontier of portofolio of varying capital structure.


Shou Chen
College of Business Administration, Hunan University, Changsha 410082, China
Xiaotie Deng
Department of Computer Science, City University of Hong Kong, Kowloon, Hong Kong
Weiguo Liu
College of Business Administration, Hunan University, Changsha 410082, China
Shouyang Wang
Institute of Systems Science, Academy of Mathematics and Systems Sciences,
Chinese Academy of Sciences, Beijing 100080, China
Abstract

We discuss impact of friction factors on portofolio optimization. In this paper, the discussion is focused on dependency of the efficient frontier on restriction in the borrowing rate of investment firms that is defined as a function of the capital structures. A few analytic results are revised in the framework of the mean-variance model.