Large-scale portfolio optimization with variational neural annealing
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.
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