IDEAS home Printed from
   My bibliography  Save this paper



  • Nalan


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.

Suggested Citation

  • Nalan, 2001. "Simulation," Computing in Economics and Finance 2001 124, Society for Computational Economics.
  • Handle: RePEc:sce:scecf1:124

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item



    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sce:scecf1:124. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.