yand-mvsk 0.1.0

Second-order portfolio optimizer for mean-variance-skewness-kurtosis (MVSK) via Yau's Affine-Normal Descent

YAND-MVSK: Portfolio Optimization with Tail Risk Control

Asset allocation that sees beyond mean and variance. Optimizes return, volatility, skewness, and kurtosis in one shot.

Markowitz gave us mean-variance. But financial returns have fat tails and asymmetry: the 2008 crash, the COVID drop, the meme stock spikes. YAND-MVSK optimizes across all four statistical moments, so your portfolio accounts for tail risk that traditional optimizers ignore. It solves in 5-10 iterations even for 800+ assets.

Who is this for?

• Quant researchers building factor portfolios or smart-beta strategies that control for higher moments
• Risk managers who want to penalize negative skewness (crash exposure) and excess kurtosis (tail risk)
• Asset allocators optimizing across ETFs, stocks, or multi-asset universes where return distributions are non-Gaussian
• Academic finance: reproducible implementation of a state-of-the-art MVSK algorithm for benchmarking

Why higher moments?

Mean-variance optimization assumes returns are Gaussian. Real markets aren't. Equities exhibit negative skewness (crashes are sharper than rallies) and excess kurtosis (extreme moves happen more than a normal distribution predicts). Ignoring these moments means your "optimal" portfolio is optimized for a world that doesn't exist.

YAND-MVSK lets you express preferences over all four moments in a single convex optimization: maximize return, minimize variance, maximize skewness (prefer upside), minimize kurtosis (avoid tail events).

Quickstart

uv add yand-mvsk

import numpy as np
from yand_mvsk import yand_mvsk_solve, crra_coefficients

# Your return matrix: T observations x n assets
R = np.random.default_rng(42).standard_normal((504, 50)) * 0.02

# Solve: 3 lines, done
result = yand_mvsk_solve(R, crra_coefficients(gamma=6))

print(result.x[:5])       # portfolio weights
print(result.converged)    # True
print(result.n_iter)       # typically 5-10

How it works

The solver never builds O(n³) coskewness tensors or O(n⁴) cokurtosis tensors. Instead, it stores only the T×n return matrix and computes everything through matrix-vector products:

Operation	Cost	What it replaces
Gradient	O(Tn)	Would need O(n³) with explicit tensors
Hessian-vector product	O(Tn)	Would need O(n⁴) with explicit tensors
Quartic line search	O(Tn)	Exact minimization of a degree-4 polynomial

This means n=800 solves in 0.05s on a laptop.

API

yand_mvsk_solve(R, c, **kwargs) → MVSKResult

Parameter	Type	Default	Description
R	(T, n) array	required	Return matrix
c	(4,) array	required	Preference weights [c₁, c₂, c₃, c₄]
x0	(n,) array	equal-weight	Initial portfolio
tau	float	1e-8	Lower bound on each weight
tol	float	1e-6	KKT convergence tolerance
max_iter	int	300	Iteration budget
line_search	str	'quartic'	'quartic' (exact) or 'armijo'
use_pcg	bool	False	Use conjugate gradients for large problems
verbose	bool	False	Print per-iteration diagnostics

crra_coefficients(gamma) → array

Returns CRRA preference coefficients for risk aversion γ:

c = (1, γ/2, γ(γ+1)/6, γ(γ+1)(γ+2)/24)

check_convexity(c) → bool

Checks sufficient convexity condition: c₄ > 0 and 8·c₂·c₄ > 3·c₃².

MVSKResult

Field	Type	Description
x	ndarray	Optimal portfolio weights
f_val	float	Objective value
kkt_residual	float	First-order optimality measure
n_iter	int	Iterations used
converged	bool	Whether tolerance was reached
history	list[float]	Per-iteration objective values

Performance

Tested on synthetic benchmarks (T=252 daily observations, CRRA γ=6). Compared against scipy.optimize.minimize (SLSQP) solving the same MVSK objective:

Assets (n)	YAND iters	YAND time	scipy SLSQP time	Speedup
20	5	0.006s	0.017s	3×
100	7	0.014s	0.12s	9×
200	8	0.025s	0.61s	24×
800	7	0.52s	28.3s	54×

YAND also finds better optima — the second-order descent with exact quartic line search reaches lower objective values than SLSQP at every scale.

Acknowledgement

This is an independent Python implementation of the YAND-MVSK algorithm by Wang, Niu, Sheshmani, and Yau, not affiliated with or endorsed by the original authors. All credit for the algorithm design, theoretical analysis, and convergence guarantees belongs to them. The affine-normal descent framework originates from the geometric work of Cheng, Yau, and collaborators, later developed into the YAND optimization framework by Niu et al.

Paper: arXiv:2604.25378 | Prior MATLAB implementation by the authors: MVSK-Multi

If you use this code in research, please cite the original paper and this implementation:

@article{wang2026yandmvsk,
  title={YAND-MVSK: Yau's Affine-Normal Descent for Large-Scale Unrestricted Mean-Variance-Skewness-Kurtosis Portfolio Optimization},
  author={Wang, Ya-Juan and Niu, Yi-Shuai and Sheshmani, Artan and Yau, Shing-Tung},
  journal={arXiv preprint arXiv:2604.25378},
  year={2026}
}

@software{wu2026yandmvsk,
  title={yand-mvsk: Python implementation of YAND-MVSK portfolio optimization},
  author={Wu, Wenbin},
  url={https://github.com/dthinkr/yand-mvsk},
  year={2026}
}

License

MIT