The Mathematical Institute, University of Oxford, Eprints Archive

Financial benchmark tracking problems under a stochastic linear quadratic control framework

Zamen, Ahmed Murtaza (2008) Financial benchmark tracking problems under a stochastic linear quadratic control framework. Masters thesis, University of Oxford.

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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.

Item Type:Thesis (Masters)
Subjects:H - N > Mathematics education
Research Groups:Mathematical and Computational Finance Group
ID Code:725
Deposited By:Laura Auger
Deposited On:18 Aug 2008
Last Modified:20 Jul 2009 14:23

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