A dynamic stochastic network model for asset allocation problem

Haiqing Song; Huei-Chuen Huang; Ning Shi; Kin Keung K. K. Lai

doi:10.1109/CSO.2009.368

A dynamic stochastic network model for asset allocation problem

Haiqing Song
, Huei-Chuen Huang
, Ning Shi^*
, Kin Keung K. K. Lai

^*Corresponding author for this work

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

Abstract

Asset allocation is an important decision problem in financial planning. In this paper, we study the multistage dynamic asset allocation problem in which an investor is allowed to reallocate its wealth among a set of assets over finite discrete decision points and the stochastic return rates of the assets follow aMarkov chain with nonstationary transition probabilities. The objective is to maximize the utility of the wealth at the end of the planning horizon where the utility of the wealth follows a general piecewise linear and concave function. Transaction costs are considered. We formulate the problem with a dynamic stochastic network model which has potential to introduce a computationally tractable tool to deal with the dynamic asset allocation problem of large number of assets and long planning horizon. © 2009 IEEE.

Original language	English
Title of host publication	Proceedings of the 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009
Pages	597-601
Volume	2
DOIs	https://doi.org/10.1109/CSO.2009.368
Publication status	Published - 2009
Event	2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009 - Sanya, Hainan, China Duration: 24 Apr 2009 → 26 Apr 2009

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Volume	2

Conference

Conference	2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009
Place	China
City	Sanya, Hainan
Period	24/04/09 → 26/04/09

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@inproceedings{532062782a754ebaa1397c20db1ce835,

title = "A dynamic stochastic network model for asset allocation problem",

abstract = "Asset allocation is an important decision problem in financial planning. In this paper, we study the multistage dynamic asset allocation problem in which an investor is allowed to reallocate its wealth among a set of assets over finite discrete decision points and the stochastic return rates of the assets follow aMarkov chain with nonstationary transition probabilities. The objective is to maximize the utility of the wealth at the end of the planning horizon where the utility of the wealth follows a general piecewise linear and concave function. Transaction costs are considered. We formulate the problem with a dynamic stochastic network model which has potential to introduce a computationally tractable tool to deal with the dynamic asset allocation problem of large number of assets and long planning horizon. {\textcopyright} 2009 IEEE.",

author = "Haiqing Song and Huei-Chuen Huang and Ning Shi and \{K. K. Lai\}, \{Kin Keung\}",

year = "2009",

doi = "10.1109/CSO.2009.368",

language = "English",

isbn = "9780769536057",

volume = "2",

pages = "597--601",

booktitle = "Proceedings of the 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009",

note = "2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009 ; Conference date: 24-04-2009 Through 26-04-2009",

}

Song, H, Huang, H-C, Shi, N & K. K. Lai, KK 2009, A dynamic stochastic network model for asset allocation problem. in Proceedings of the 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009. vol. 2, 5194022, pp. 597-601, 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009, Sanya, Hainan, China, 24/04/09. https://doi.org/10.1109/CSO.2009.368

A dynamic stochastic network model for asset allocation problem. / Song, Haiqing; Huang, Huei-Chuen; Shi, Ning et al.
Proceedings of the 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009. Vol. 2 2009. p. 597-601 5194022.

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

TY - GEN

T1 - A dynamic stochastic network model for asset allocation problem

AU - Song, Haiqing

AU - Huang, Huei-Chuen

AU - Shi, Ning

AU - K. K. Lai, Kin Keung

PY - 2009

Y1 - 2009

N2 - Asset allocation is an important decision problem in financial planning. In this paper, we study the multistage dynamic asset allocation problem in which an investor is allowed to reallocate its wealth among a set of assets over finite discrete decision points and the stochastic return rates of the assets follow aMarkov chain with nonstationary transition probabilities. The objective is to maximize the utility of the wealth at the end of the planning horizon where the utility of the wealth follows a general piecewise linear and concave function. Transaction costs are considered. We formulate the problem with a dynamic stochastic network model which has potential to introduce a computationally tractable tool to deal with the dynamic asset allocation problem of large number of assets and long planning horizon. © 2009 IEEE.

AB - Asset allocation is an important decision problem in financial planning. In this paper, we study the multistage dynamic asset allocation problem in which an investor is allowed to reallocate its wealth among a set of assets over finite discrete decision points and the stochastic return rates of the assets follow aMarkov chain with nonstationary transition probabilities. The objective is to maximize the utility of the wealth at the end of the planning horizon where the utility of the wealth follows a general piecewise linear and concave function. Transaction costs are considered. We formulate the problem with a dynamic stochastic network model which has potential to introduce a computationally tractable tool to deal with the dynamic asset allocation problem of large number of assets and long planning horizon. © 2009 IEEE.

UR - https://www.scopus.com/pages/publications/70449433819

UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-70449433819&origin=recordpage

U2 - 10.1109/CSO.2009.368

DO - 10.1109/CSO.2009.368

M3 - RGC 32 - Refereed conference paper (with host publication)

SN - 9780769536057

VL - 2

SP - 597

EP - 601

BT - Proceedings of the 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009

T2 - 2009 International Joint Conference on Computational Sciences and Optimization, CSO 2009

Y2 - 24 April 2009 through 26 April 2009

ER -

A dynamic stochastic network model for asset allocation problem

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