A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking

Srikanth Sridharan, Divakar Chitturi, Armando Rodriguez

Research output: Chapter in Book/Report/Conference proceedingConference contribution

2 Citations (Scopus)

Abstract

In this paper, we consider the problem of financial portfolio optimization. A hierarchical framework is used, and receding horizon control (RHC) ideas are exploited to pose and solve two relevant constrained optimization problems. We first present the classic problem of wealth maximization subject to risk constraints. We also formulate a new approach to portfolio optimization which attempts to minimize the peak risk over the prediction horizon, while trying to track a wealth objective. This approach is designed to assist investors that might be unable to precisely specify their risk tolerance. We compare this methodology with the classical approach. It is concluded that this approach may be particularly beneficial during downturns appreciably limiting losses during downturns while providing most of the upturn benefits.

Original languageEnglish (US)
Title of host publicationProceedings of the IEEE International Conference on Control Applications
Pages1282-1287
Number of pages6
DOIs
StatePublished - 2011
Event2011 20th IEEE International Conference on Control Applications, CCA 2011 - Denver, CO, United States
Duration: Sep 28 2011Sep 30 2011

Other

Other2011 20th IEEE International Conference on Control Applications, CCA 2011
CountryUnited States
CityDenver, CO
Period9/28/119/30/11

Fingerprint

Minimax Risk
Receding Horizon Control
Portfolio Optimization
Constrained optimization
Constrained Optimization Problem
Tolerance
Horizon
Limiting
Minimise
Methodology
Prediction

ASJC Scopus subject areas

  • Control and Systems Engineering
  • Computer Science Applications
  • Mathematics(all)

Cite this

Sridharan, S., Chitturi, D., & Rodriguez, A. (2011). A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking. In Proceedings of the IEEE International Conference on Control Applications (pp. 1282-1287). [6044440] https://doi.org/10.1109/CCA.2011.6044440

A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking. / Sridharan, Srikanth; Chitturi, Divakar; Rodriguez, Armando.

Proceedings of the IEEE International Conference on Control Applications. 2011. p. 1282-1287 6044440.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Sridharan, S, Chitturi, D & Rodriguez, A 2011, A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking. in Proceedings of the IEEE International Conference on Control Applications., 6044440, pp. 1282-1287, 2011 20th IEEE International Conference on Control Applications, CCA 2011, Denver, CO, United States, 9/28/11. https://doi.org/10.1109/CCA.2011.6044440
Sridharan S, Chitturi D, Rodriguez A. A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking. In Proceedings of the IEEE International Conference on Control Applications. 2011. p. 1282-1287. 6044440 https://doi.org/10.1109/CCA.2011.6044440
Sridharan, Srikanth ; Chitturi, Divakar ; Rodriguez, Armando. / A receding horizon control approach to portfolio optimization using a risk-minimax objective for wealth tracking. Proceedings of the IEEE International Conference on Control Applications. 2011. pp. 1282-1287
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