Investment portfolio tracking using model predictive control

Melo, Maísa Kely de; Cardoso, Rodrigo T. N.; Jesus, Tales Argolo; Raffo, Guilherme V.

doi:10.1002/oca.2937

Optim Control Appl Methods

2022

DOI: 10.1002/oca.2937

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Investment portfolio tracking using model predictive control

Maísa Kely de Melo

Rodrigo T. N. Cardoso

Tales Argolo Jesus

et al.

Abstract: The composition of an investment portfolio aiming to increase the financial returns while reducing the exposure to risk is a topic of growing interest in the world. In this direction, we propose a model predictive control (MPC) strategy in order to optimize the investment portfolio selection taking into account the tracking of a reference portfolio with desired return. In addition, an analysis comparing different sizes of the prediction horizon according to VPH-MPC (Varying Predictive Horizon-MPC) and FPH-MPC … Show more

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Cited by 3 publications

References 41 publications

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Price optimization for manufacturers in a competitive retail market: imported products and online crowdfunding option

Parvasi,

Taleizadeh,

Thaichon

2024

J Revenue Pricing Manag

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This study explores how manufacturers in the competitive supply chain can set prices and secure funding effectively. We use game theory to look at how competition between domestic and foreign manufacturers affects pricing decisions. Our research investigates how a domestic manufacturer can improve its market share by addressing financial challenges through modern financing methods. In this scenario, a domestic manufacturer competes with a foreign one to attract a retailer’s market share and profits. The retailer decides what products to buy and how to price them based on bid prices and demand. We also consider that the domestic manufacturer will use online crowdfunding platforms to tackle its financial problem. Hence, our study sets up a supply chain where competition revolves around both operational and financial decisions. Mathematical models are developed to analyze how costs, finances, market potential, and price sensitivity impact various parts of the supply chain. The results reveal that decisions made on the crowdfunding platform significantly influence other supply chain decisions. Manufacturers and retailers need to pay attention to the financial decisions made on this platform to maximize profits. Also, domestic and foreign manufacturers should consider customer preferences for their products when setting prices. Finally, the results demonstrate that a domestic manufacturer can gain a competitive edge in the retail market by carefully considering both product pricing and financial decisions, including those made on the lending platform.

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Price optimization for manufacturers in a competitive retail market: imported products and online crowdfunding option

Parvasi,

Taleizadeh,

Thaichon

2024

J Revenue Pricing Manag

View full text Add to dashboard Cite

show abstract

Selecting and Weighting Mechanisms in Stock Portfolio Design Based on Clustering Algorithm and Price Movement Analysis

Purwandari,

Riaman,

Hidayat

et al. 2023

Mathematics

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The fundamental stages in designing a stock portfolio are each stock’s selection and capital weighting. Selection and weighting must be conducted through diversification and price movement analysis to maximize profits and minimize losses. The problem is how the technical implementations of both are carried out. Based on this problem, this study aims to design these selection and weighting mechanisms. Stock selection is based on clusters and price movement trends. The optimal stock clusters are formed using the K-Means algorithm, and price movement analyses are carried out using the moving average indicator. The selected stocks are those whose prices have increasing trends with the most significant Sharpe ratio in each cluster. Then, the capital weighting for each preferred stock is carried out using the mean-variance model with transaction cost and income tax. After designing the mechanism, it is applied to Indonesia’s 80 index stock data. In addition, a comparison is conducted between the estimated portfolio return and the actual one day ahead. Finally, the sensitivity of investors’ courage in taking risks to their profits and losses is also analyzed. This research is expected to assist investors in diversification and price movement analysis of the stocks in the portfolios they form.

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Validation of Stock Price Prediction Models in the Conditions of Financial Crisis

Mihova,

Georgiev,

Raeva

et al. 2023

Mathematics

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The distribution laws of various natural and anthropogenic processes in the world around us are stochastic in nature. The development of mathematics and, in particular, of stochastic modeling allows us to study regularities in such processes. In practice, stochastic modeling finds a huge number of applications in various fields, including finance and economics. In this work, some particular applications of stochastic processes in finance are examined in the conditions of financial crisis, aiming to provide a solid approach for stock price forecasting. More specifically, autoregressive integrated moving average (ARIMA) models and modified ordinary differential equation (ODE) models, previously developed by some of the authors to predict the asset prices of four Bulgarian companies, are validated against a time period during the crisis. Estimated rates of return are calculated from the models for one period ahead. The errors are estimated and the models are compared. The return values predicted with each of the two approaches are used to derive optimal risk portfolios based on the Markowitz model, which is the second major aim of this study. The third aim is to compare the resulting portfolios in terms of distribution (i.e., weights of the stocks), risk, and rate of return.

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Investment portfolio tracking using model predictive control

Cited by 3 publications

References 41 publications

Price optimization for manufacturers in a competitive retail market: imported products and online crowdfunding option

Price optimization for manufacturers in a competitive retail market: imported products and online crowdfunding option

Selecting and Weighting Mechanisms in Stock Portfolio Design Based on Clustering Algorithm and Price Movement Analysis

Validation of Stock Price Prediction Models in the Conditions of Financial Crisis

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