Simulation

Nalan

No 124, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: In this paper, three approaches are presented for generating scenario trees for financial portfolio problems. These are based on simulation, optimization and a hybrid simulation/optimization method. In the simulation approach, the price scenarios at each time period are generated as the centroids of random scenario simulations generated sequentially or in parallel. In the optimization procedure, a limited number of discrete outcomes which satisfy specified statistical properties are generated by solving either a sequence of nonlinear optimization models (one at each node of the scenario tree) or one large optimization problem. In the hybrid approach, the optimization problem is reduced in size by fixing some variables to values obtained by simulations. These procedures are back-tested on a set of historical data and computational results are presented.

Keywords: Stochastic (search for similar items in EconPapers)
JEL-codes: C15 (search for similar items in EconPapers)
Date: 2001-04-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf1:124

Access Statistics for this paper

More papers in Computing in Economics and Finance 2001 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().