Tracking a financial benchmark using a few assets
成果类型：
Article
署名作者：
Yao, DD; Zhang, SH; Zhou, XY
署名单位：
Columbia University; Chinese University of Hong Kong
刊物名称：
OPERATIONS RESEARCH
ISSN/ISSBN：
0030-364X
DOI：
10.1287/opre.1050.0260
发表日期：
2006
页码：
232-246
关键词：
摘要：
We study the problem of tracking a financial benchmark-a continuously compounded growth rate or a stock market index-by dynamically managing a portfolio consisting of a small number of traded stocks in the market. In either case, we formulate the tracking problem as an instance of the stochastic linear quadratic control (SLQ), involving indefinite cost matrices. As the SLQ formulation involves a discounted objective over an infinite horizon, we first address the issue of stabilizability. We then use semidefinite programming (SDP) as a computational tool to generate the optimal feedback control. We present numerical examples involving stocks traded at the Hong Kong and New York Stock Exchanges to illustrate the various features of the model and its performance.