Financial planning for young households
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- Pedersen, A.M.B., Weissensteiner, A. & Poulsen, R. Ann Oper Res (2013) 205: 55. doi:10.1007/s10479-012-1205-3
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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.