Sharpe-Ratio Portfolio in Controllable Markov Chains: Analytic and Algorithmic Approach for Second Order Cone Programming

The Sharpe ratio is a measure based on the theory of mean variance, it performance portfolio when risk can be measured through standard deviation. This paper suggests Sharpe-ratio solution using second order cone programming (SOCP). We use penalty-regularized method to represent nonlinear problem. present computationally tractable way determining portfolio. A Markov chain structure employed underlying asset price process. In determine optimal in chains, new hybrid optimization for SOCP proposed. suggested method’s efficiency and efficacy are demonstrated numerical example.