A Stochastic Programming Approach for Multi-Period Portfolio Optimization

Abstract

presented in this paper. The basic model involves Multi-Period decisions (portfolio optimization) and deals with the usual uncertainty of investment returns and future liabilities. Therefore, is it well suited to a stochastic programming approach.

We consider the problem of rebalancing policy to accomplish some investment’s criteria. Transaction costs have also been a subject of concern in this paper. In particular, a large amount of transactions usually make asset price move in an unfavorable direction. Therefore, the first problem neglects transactions cost while the second does not.