Constructing an Index Fund Using Interior Point Primal- Dual Method

Abstract: Optimization methods nowadays play a very important role in financial decisions such as portfolio managements, construction of index funds and pension funds.  This Master Thesis is devoted to the problem of an index fund construction. The problem is represented as a linear optimization problem of re-balancing the portfolio at minimum cost and solved using the Primal-Dual interior point method. The index fund is constructed using ten companies from the Dow Jones Industrial Average Index (DJIA). The Primal-Dual interior point method was first implemented in Matlab and later on in Java.