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The performance of stochastic dynamic and xed mix portfolio models

Fleten, Stein-Erik and Hoyland, Kjetil and Wallace, Stein W (2002) The performance of stochastic dynamic and xed mix portfolio models. European Journal of Operational Research, 140 (1). pp. 37-49. ISSN 0377-2217

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Abstract

The purpose of this paper is to demonstrate how to evaluate stochastic programming models, and more specifically to compare two different approaches to asset liability management. The first uses multistage stochastic programming, while the other is a static approach based on the so-called constant rebalancing or fixed mix. Particular attention is paid to the methodology used for the comparison. The two alternatives are tested over a large number of realistic scenarios created by means of simulation. We find that due to the ability of the stochastic programming model to adapt to the information in the scenario tree, it dominates the fixed mix approach.

Item Type: Article
Journal or Publication Title: European Journal of Operational Research
Uncontrolled Keywords: Simulation ; Stochastic programming iability management; Performance measurement; Nonlinear programming ; Portfolio selection ; Asset liability management ; Performance measurement ; Nonlinear programming
Subjects: UNSPECIFIED
Departments: Lancaster University Management School > Management Science
ID Code: 45386
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 19:31
Refereed?: Yes
Published?: Published
Last Modified: 26 Jul 2012 19:16
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/45386

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