Solving a linear multiperiod portfolio problem by interior-point methodology

Abstract

In this report we formulate a linear multiperiod programming problem and show how it can be solved by a new interior point algorithm. The conditions of convergence and applicability of the algorithm of centers are explicitly connected to the multiperiod programming problem. For the former, effective application is supported by a set of simplifying conditions stated and proved in the text. For the latter, boundedness and nontriviality under real world conditions is demonstrated, allowing for its solution by the interior point algorithm. The use of a fast interior point algorithm is motivated by some empirical evidence from a Revised Simplex optimizer.