Tighter yet more tractable relaxations and nontrivial instance generation for sparse standard quadratic optimization

TL;DR

This paper introduces tighter convex relaxations and efficient instance generation methods for sparse standard quadratic optimization problems, improving solution quality and computational robustness in high-dimensional, NP-hard settings.

Contribution

It develops novel convex relaxations with dimensional reduction and a systematic instance generation procedure for sparse StQPs, enhancing tractability and instance difficulty.

Findings

Relaxation bounds are of high quality across many instances.

Reduced formulations significantly improve solution times.

Relaxations are robust to parameter variations.

Abstract

The Standard Quadratic optimization Problem (StQP), arguably the simplest among all classes of NP-hard optimization problems, consists of extremizing a quadratic form (the simplest nonlinear polynomial) over the standard simplex (the simplest polytope/compact feasible set). As a problem class, StQPs may be nonconvex with an exponential number of inefficient local solutions. StQPs arise in a multitude of applications, among them mathematical finance, machine learning (clustering), and modeling in biosciences (e.g., selection and ecology). This paper deals with such StQPs under an additional sparsity or cardinality constraint, which, even for convex objectives, renders NP-hard problems. One motivation to study StQPs under such sparsity restrictions is the high-dimensional portfolio selection problem with too many assets to handle, in particular, in the presence of transaction costs. Here, relying on modern conic optimization techniques, we present tractable convex relaxations for this relevant but difficult problem. We propose novel equivalent reformulations of these relaxations with significant dimensional reduction, which is essential for the tractability of these relaxations when the problem size grows. Moreover, we propose an instance generation procedure which systematically avoids too easy instances. Our extensive computational results illustrate the high quality of the relaxation bounds in a significant number of instances. Furthermore, in contrast with exact mixed-integer quadratic programming models, the solution time of the relaxations is very robust to the choices of the problem parameters. In particular, the reduced formulations achieve significant improvements in terms of the solution time over their counterparts.