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Multistage Financial Planning Models: Integrating Stochastic Programs and Policy Simulators

In: Stochastic Programming

Author

Listed:
  • John M. Mulvey

    (Princeton University)

  • Woo Chang Kim

    (Korea Advanced Institute of Science and Technology)

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

Suggested Citation

  • John M. Mulvey & Woo Chang Kim, 2010. "Multistage Financial Planning Models: Integrating Stochastic Programs and Policy Simulators," International Series in Operations Research & Management Science, in: Gerd Infanger (ed.), Stochastic Programming, chapter 0, pages 257-275, Springer.
    • Handle: RePEc:spr:isochp:978-1-4419-1642-6_12
    DOI: 10.1007/978-1-4419-1642-6_12
    as

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