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Portfolio Models with Stochastic Cash Demands

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  • Andrew H. Y. Chen

    (State University of New York at Buffalo)

  • Prank C. Jen

    (State University of New York at Buffalo)

  • Stanley Zionts

    (State University of New York at Buffalo)

Abstract

The problem of unifying portfolio planning and transaction demands for cash in a single model is considered. We distinguish between portfolio selection and portfolio revision problems. Each problem is formulated as a single-period model allowing exogenous stochastic cash demands and: (1) deterministic returns on the earning assets, (2) stochastic returns on the earning assets. Thus, four single-period models are presented. An analytic solution for one of the models is derived, and numerical examples given. The other models are nonlinear programming problems, two of which are computationally tractable. Implication's of the models are discussed.

Suggested Citation

  • Andrew H. Y. Chen & Prank C. Jen & Stanley Zionts, 1972. "Portfolio Models with Stochastic Cash Demands," Management Science, INFORMS, vol. 19(3), pages 319-332, November.
    • Handle: RePEc:inm:ormnsc:v:19:y:1972:i:3:p:319-332
    DOI: 10.1287/mnsc.19.3.319
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