Multistage Financial Planning Models: Integrating Stochastic Programs and Policy Simulators

John M. Mulvey () and Woo Chang Kim ()
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John M. Mulvey: Princeton University
Woo Chang Kim: Korea Advanced Institute of Science and Technology

Chapter Chapter 12 in Stochastic Programming, 2010, pp 257-275 from Springer

Abstract: Abstract This chapter reviews multistage financial planning models, with a focus on practical approaches for optimizing investors´ performance over time. We discuss two major frameworks for constructing financial planning models: (1) policy rule simulation and optimization and (2) multistage stochastic programming. We advocate an integrated approach, in which a stylized stochastic program helps the investor discover robust decision/policy rules. In the second stage, the policy optimizer compares policy rules as well as provides additional information about future investment performance. To illustrate benefits, we apply the dual strategy to the defined benefit pension plans in the USA

Keywords: Stochastic Program; Policy Rule; Momentum Strategy; Investment Performance; Dual Strategy (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-1-4419-1642-6_12

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DOI: 10.1007/978-1-4419-1642-6_12

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