Abstract
Optimal portfolio trading subject to stochastic dominance constraints under second-order autoregressive price dynamics
by
Arti Singh
In this study, the optimal portfolio trading problem under the generalized second-order autoregressive execution price model is considered. The problem of minimizing expected execution cost under the proposed price model is formulated as a quadratic programming (QP) problem. For a risk-averse trader, problem formulation under the second-order stochastic dominance constraints results in a quadratically constrained QP problem. Under some conditions on the execution price model, it is proved that the portfolio trading problems for risk-neutral and risk-averse traders become convex programming problems, which have many theoretical and computational advantages over the general class of optimization problems. Extensive numerical illustrations are provided, which render the practical significance of the proposed execution price model and the portfolio trading problems.
Committee
Workshop
Key Dates
Communication
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