I'm trying to solve the below problem.
We define a budget for our long short allocation (Sum(W) == 0). Suppose one of the asset in that portfolio get weight of 25% and this means if we are allocating the 10 million then that asset will get 1 Mil but out margin constraints should limit this position to 500k USD. Now if I add a constraint that w[Asset] < 500k USD/ 10 Million. This can assign the weight of Asset as 0.25% but this won't utilize the complete margin. Now to solve this we normalize this weights as W[Assset] / Sum(abs(w)). But this will again break the 500k Usd constraint? Is there any way to solve above?
I'm expecting to add constraint which will solve this.
Can this problem be solved in the MVO frameworks as complex problem or i have to shift to non convex optimization solvers?
