A Matlab-based rapid method for computing lattice-subspaces and vector sublattices of Rn: Applications in portfolio insurance

摘要

This paper provides the construction of a powerful and efficient computational method, that translates Polyrakis algorithm [I.A. Polyrakis, Minimal lattice-subspaces, Trans. Am. Math. Soc. 351 (1999) 4183–4203, Theorem 3.19] for the calculation of lattice-subspaces and vector sublattices in Rn. In the theory of finance, lattice-subspaces have been extensively used in order to provide a characterization of market structures in which the cost-minimizing portfolio is price-independent. Specifically, we apply our computational method in order to solve a cost minimization problem that ensures the minimum-cost insured portfolio.