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A Fast Algorithm for Computing High-dimensional Risk Parity Portfolios

Griveau-Billion, Théophile and Richard, Jean-Charles and Roncalli, Thierry (2013): A Fast Algorithm for Computing High-dimensional Risk Parity Portfolios.

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Abstract

In this paper we propose a cyclical coordinate descent (CCD) algorithm for solving high dimensional risk parity problems. We show that this algorithm converges and is very fast even with large covariance matrices (n > 500). Comparison with existing algorithms also shows that it is one of the most efficient algorithms.

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