Please use this identifier to cite or link to this item: https://doi.org/10.1109/IEEM.2007.4419142
Title: Dynamic stochastic programming for asset allocation problem
Authors: Song, H. 
Huang, H.-C. 
Keywords: Asset allocation
Dynamic stochastic programming
Portfolio management
Issue Date: 2007
Source: Song, H., Huang, H.-C. (2007). Dynamic stochastic programming for asset allocation problem. IEEM 2007: 2007 IEEE International Conference on Industrial Engineering and Engineering Management : 16-20. ScholarBank@NUS Repository. https://doi.org/10.1109/IEEM.2007.4419142
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. © 2007 IEEE.
Source Title: IEEM 2007: 2007 IEEE International Conference on Industrial Engineering and Engineering Management
URI: http://scholarbank.nus.edu.sg/handle/10635/72320
ISBN: 1424415292
DOI: 10.1109/IEEM.2007.4419142
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