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Stochastic network optimization models for investment planning. (English) Zbl 0704.90033
Summary: We describe and compare stochastic network optimization models for investment planning under uncertainty. Emphasis is placed on multiperiod asset allocation and active portfolio management problems. Myopic as well as multiple period models are considered. In the case of multiperiod models, the uncertainty in asset returns filters into the constraint coefficient matrix, yielding a multi-scenario program formulation. Different scenario generation procedures are examined. The use of utility functions to reflect risk bearing attitudes results in nonlinear stochastic network models. We adopt a newly proposed decomposition procedure for solving these multiperiod stochastic programs. The performance of the models in simulations based on historical data is discussed.

MSC:
90B15 Stochastic network models in operations research
91B28 Finance etc. (MSC2000)
90C15 Stochastic programming
90-08 Computational methods for problems pertaining to operations research and mathematical programming
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