ABSTRACT
We describe a method for generating daily trading signals to construct trade portfolios of exchange traded securities. Our model uses Second Order Stochastic Dominance (SSD) as the choice criterion for both long and short positions. We control dynamic risk of ‘draw down’ by applying money management. The asset choice for long and short positions are influenced by market sentiment; the market sentiments are in turn acquired from news wires and microblogs. The solution method is challenging as it requires processing stochastic integer programming (SIP) models as well as computing the impact of market sentiment. The computation of SSD portfolios are well known to be computationally hard as this involves processing of large discrete MIP problems. The solution approach is based on our well-established solver system FortSP which uses CPLEX as its embedded solver engine to process SIP models
