NDLI: Dynamic stochastic programming for asset allocation problem

Content Provider	IEEE Xplore Digital Library
Author	Haiqing Song Huei-Chuen Huang
Copyright Year	2007
Description	Author affiliation: Nat. Univ. of Singapore, Singapore (Haiqing Song; Huei-Chuen Huang)
Abstract	Asset allocation is an important decision problem in financial planning. In this paper, we study the multistage dynamic asset allocation problem which an investor is allowed to reallocate its wealth among a set of assets over finite discrete decision points, in which the stochastic return rates of the assets follow a Markov chain with nonstationary transition probabilities. The objective is to maximize the utility of the wealth at the end of the planning horizon where the utility of the wealth follows a general piecewise linear and concave function. Transaction costs are considered. We formulate the problem with a dynamic stochastic programming model and develop a method that decomposes the problem into stage-based subproblems to solve it. The main advantage of this method is that it provides a computationally tractable tool to deal with the dynamic asset allocation problem of long planning horizon.
Starting Page	16
Ending Page	20
File Size	374513
Page Count	5
File Format	PDF
ISBN	9781424415281
DOI	10.1109/IEEM.2007.4419142
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2007-12-02
Publisher Place	Singapore
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Uncertainty Piecewise linear techniques Portfolio Management Stochastic processes Asset Allocation Dynamic Stochastic Programming Linear programming Educational institutions Asset management Stochastic systems Systems engineering and theory Dynamic programming Portfolios
Content Type	Text
Resource Type	Article

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