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Strategic financial risk management and operations research. (English) Zbl 0920.90008
Summary: Risk management has become a vital topic for financial institutions in the 1990s. Strategically, asset/liability management systems are important tools for controlling a firm’s financial risks. They manage these risks by dynamically balancing the firm’s asset and liabilities to achieve the firm’s objectives. We discuss such leading international firms as Towers Perrin, Frank Russell, and Falcon Asset Management, which apply asset/liability management for efficiently managing risk over extended time periods. Three components of asset/liability management are described: 1) a multi-stage stochastic program for coordinating the asset/liability decisions; 2) a scenario generation procedure for modeling the stochastic parameters; and 3) solution algorithms for solving the resulting large-scale optimization problem.

MSC:
91B28 Finance etc. (MSC2000)
90C90 Applications of mathematical programming
90C15 Stochastic programming
90C06 Large-scale problems in mathematical programming
Software:
CPLEX; LOQO; MINOS; MSLiP
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