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Cash management using multi-stage stochastic programming

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We consider a cash management problem where a company with a given financial endowment and given future cash flows minimizes the Conditional Value at Risk of final wealth using a lower bound for the expected terminal wealth. We formulate the optimization problem as a multi-stage stochastic linear program (SLP). The company can choose between a riskless asset (cash), several default- and option-free bonds, and an equity investment, and rebalances the portfolio at every stage. The uncertainty faced by the company is reflected in the development of interest rates and equity returns. Our model has two new features compared to the existing literature, which uses no-arbitrage interest rate models for the scenario generation. First, we explicitly estimate a function for the market price of risk and change the underlying probability measure. Second, we simulate scenarios for equity returns with moment-matching by an extension of the interest rate scenario tree.

Cash management using multi-stage stochastic programming

Urheber*in: Ferstl, Robert; Weissensteiner, Alex

Free access - no reuse

Extent: Seite(n): 209-219

Language: Englisch

Notes: Status: Postprint; begutachtet (peer reviewed)

Bibliographic citation: Quantitative Finance, 10(2)

Subject: Wirtschaft
Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Finanzwirtschaft, Rechnungswesen

Event: Geistige Schöpfung

(who): Ferstl, Robert
Weissensteiner, Alex

Event: Veröffentlichung

(where): Vereinigtes Königreich

(when): 2010

DOI: https://doi.org/10.1080/14697680802637908

URN: urn:nbn:de:0168-ssoar-221467

Rights: GESIS - Leibniz-Institut für Sozialwissenschaften. Bibliothek Köln

Last update: 21.06.2024, 4:27 PM CEST

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Object type

Zeitschriftenartikel

Associated

Ferstl, Robert
Weissensteiner, Alex

Time of origin

2010

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