Skip to main content
Article thumbnail
Location of Repository

Financial benchmark tracking problems under a stochastic linear quadratic control framework

By Ahmed Murtaza Zamen

Abstract

In this thesis we analyse the problem of tracking a financial benchmark via trading a portfolio of a small number of assets on a finite time horizon. The development of general stochastic linear quadratic control (SLQ) theory in recent years allows us to study this investment problem using this approach. We formulate the problem under the SLQ control framework and derive an optimal feedback control solution using stochastic Riccati equations and an accompanying equation. We then apply our theory to benchmark problems involving tracking a continuously compounded given growth rate and a stock market index to obtain novel solutions. An outline of how we might implement the model in practice is also given

Topics: Mathematics education
Year: 2008
OAI identifier: oai:generic.eprints.org:725/core69

Suggested articles

Citations

  1. (2000). Continuous-Time Mean-Variance Portfolio Selection: doi
  2. (1960). Contributions to the theory of optimal control,
  3. (1998). Investment Science,
  4. (2000). Linear matrix inequalities, Riccati equations, and indefinite stochastic linear quadratic controls, doi
  5. (1968). On a matrix Riccati equation of stochastic control, doi
  6. (1998). Stochastic linear quadratic control regulators with indefinite control weight costs, doi
  7. (2006). Tracking a Financial Benchmark Using a Few Assets, doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.