Dynamic Investment Portfolio Optimization under Constraints in the Financial Market with Regime Switching using Model Predictive Control

Vladimir Dombrovskii and Tatyana Obyedko

Papers from arXiv.org

Abstract: In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric Brownian motion. The states of Markov chain are interpreted as the states of an economy. The problem is stated as a dynamic tracking problem of a reference portfolio with desired return. We propose to use the model predictive control (MPC) methodology in order to obtain feedback trading strategies. Our approach is tested on a set of a real data from the radically different financial markets: the Russian Stock Exchange MICEX, the New York Stock Exchange and the Foreign Exchange Market (FOREX).

Date: 2014-10
New Economics Papers: this item is included in nep-cis
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1410.1136 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1410.1136

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().