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Financial planning for young households

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  • Anne Pedersen
  • Alex Weissensteiner
  • Rolf Poulsen

Abstract

We analyze the financial planning problems of young households whose main decisions are how to finance the purchase of a house (liabilities) and how to allocate investments in pension savings schemes (assets). The problems are solved using a multi-stage stochastic programming model where the uncertainty is described by a scenario tree generated from a vector auto-regressive process for equity returns and interest rate evolution. We find strong evidence of the importance of taking into account the multi-stage nature of the problem, as well as the need to consider the asset and liability sides jointly. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Anne Pedersen & Alex Weissensteiner & Rolf Poulsen, 2013. "Financial planning for young households," Annals of Operations Research, Springer, vol. 205(1), pages 55-76, May.
    • Handle: RePEc:spr:annopr:v:205:y:2013:i:1:p:55-76:10.1007/s10479-012-1205-3
    DOI: 10.1007/s10479-012-1205-3
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    Cited by:

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    6. Dieudonné Tchuente & Serge Nyawa, 2022. "Real estate price estimation in French cities using geocoding and machine learning," Annals of Operations Research, Springer, vol. 308(1), pages 571-608, January.

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