English

Large-scale portfolio optimization with variational neural annealing

Disordered Systems and Neural Networks 2025-07-11 v1 Statistical Mechanics Machine Learning Portfolio Management

Abstract

Portfolio optimization is a routine asset management operation conducted in financial institutions around the world. However, under real-world constraints such as turnover limits and transaction costs, its formulation becomes a mixed-integer nonlinear program that current mixed-integer optimizers often struggle to solve. We propose mapping this problem onto a classical Ising-like Hamiltonian and solving it with Variational Neural Annealing (VNA), via its classical formulation implemented using autoregressive neural networks. We demonstrate that VNA can identify near-optimal solutions for portfolios comprising more than 2,000 assets and yields performance comparable to that of state-of-the-art optimizers, such as Mosek, while exhibiting faster convergence on hard instances. Finally, we present a dynamical finite-size scaling analysis applied to the S&P 500, Russell 1000, and Russell 3000 indices, revealing universal behavior and polynomial annealing time scaling of the VNA algorithm on portfolio optimization problems.

Keywords

Cite

@article{arxiv.2507.07159,
  title  = {Large-scale portfolio optimization with variational neural annealing},
  author = {Nishan Ranabhat and Behnam Javanparast and David Goerz and Estelle Inack},
  journal= {arXiv preprint arXiv:2507.07159},
  year   = {2025}
}

Comments

16 pages, 13 figures, 1 table

R2 v1 2026-07-01T03:53:44.690Z