Computational Management Science

, Volume 6, Issue 3, pp 307–327

On multistage Stochastic Integer Programming for incorporating logical constraints in asset and liability management under uncertainty

  • Laureano F. Escudero
  • Araceli Garín
  • María Merino
  • Gloria Pérez
Original Paper

DOI: 10.1007/s10287-006-0035-7

Cite this article as:
Escudero, L.F., Garín, A., Merino, M. et al. Comput Manag Sci (2009) 6: 307. doi:10.1007/s10287-006-0035-7

Abstract

We present a model for optimizing a mean-risk function of the terminal wealth for a fixed income asset portfolio restructuring with uncertainty in the interest rate path and the liabilities along a given time horizon. Some logical constraints are considered to be satisfied by the assets portfolio. Uncertainty is represented by a scenario tree and is dealt with by a multistage stochastic mixed 0-1 model with complete recourse. The problem is modelled as a splitting variable representation of the Deterministic Equivalent Model for the stochastic model, where the 0-1 variables and the continuous variables appear at any stage. A Branch-and-Fix Coordination approach for the multistage 0–1 program solving is proposed. Some computational experience is reported.

Keywords

Multistage scenario tree Assets and liabilities Stochastic Integer Programming Branch-and-Fix Coordination Mean-risk function 

AMS Subject Classification

90C15 90C11 90C06 

Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  • Laureano F. Escudero
    • 1
  • Araceli Garín
    • 2
  • María Merino
    • 3
  • Gloria Pérez
    • 3
  1. 1.Centro de Investigación OperativaUniversidad Miguel HernándezElche (Alicante)Spain
  2. 2.Dpto. de Economía Aplicada IIIUniversidad del País VascoBilbao (Vizcaya)Spain
  3. 3.Dpto. de Matemática AplicadaEstadística e I.O, Universidad del País VascoLeioa (Vizcaya)Spain