Authors: Leonardo Riegel Sant’Anna Tiago Pascoal Filomena Pablo Cristini Guedes Denis Borenstein
Publish Date: 2016/02/03
Volume: 258, Issue: 2, Pages: 849-867
Abstract
In this paper we discuss the index tracking strategy using mathematical programming First we use a nonlinear programming formulation for the index tracking problem considering a limited number of assets Since the problem is difficult to be solved in reasonable time by commercial mathematical packages we apply a hybrid solution approach combining mathematical programming and genetic algorithm We show the efficiency of the proposed approach comparing the results with optimal solutions with previous developed methods and from realworld market indexes The computational experiments focus on Ibovespa the most important Brazilian market index but we also present results for consolidated markets such as SP 100 USA FTSE 100 UK and DAX Germany The proposed framework shows its ability to obtain very good results gaps from the optimal solution smaller than 5 in 8 min of CPU time even for a highly volatile index from a developing countryThe authors thank the two anonymous referees and the associate editor for their valuable comments and suggestions that greatly improved the quality of the paper This research was funded by the following Brazilian Research Agencies CAPES CNPq and FAPERGS and Senescyt Ecuador
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