Title: A Stochastic Control Approach to Managed Futures Portfolios,
Abstract: We study a stochastic control approach to managed futures portfolios.
Building on the Schwartz 97 stochastic convenience yield model for commodity
prices, we formulate a utility maximization problem for dynamically trading a
single-maturity futures or multiple futures contracts over a finite horizon. By
analyzing the associated Hamilton-Jacobi-Bellman (HJB) equation, we solve the
investor's utility maximization problem explicitly and derive the optimal
dynamic trading strategies in closed form. We provide numerical examples and
illustrate the optimal trading strategies using WTI crude oil futures data.