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Summary: ELSEVIER
Journal of Economic Dynamics and Control
21 (1997) 1405-1425
Solving long-term financial planning
via global optimization
&"Control
problems
C.D. Maranas, a I.P. Androulakis, a C.A. Floudas, a,* A.J. Berger, b
J.M. Mulvey b
aDepartment of Chemical Engineering, Princeton University, Princeton, NJ 08544-5263, USA
b Department of Civil Engineering and Operations Research, Princeton University, Princeton, NJ
08544, USA
Abstract
A significant multi-stage financial planning problem is posed as a stochastic program
with decision rules. The decision rule - called dynamically balanced - requires the pur-
chase and sale of assets at each time stage so as to keep constant asset proportions in
the portfolio composition. It leads to a nonconvex objective function. We show that the
rule performs well as compared with other dynamic investment strategies. We special-
ize a global optimization algorithm for this problem class - guaranteeing finite E-optimal
convergence. Computational results demonstrate the procedure's efficiency on a real-world
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