Publisher Summary This chapter reviews stochastic programming models for asset and
liability management (ALM). It introduces the basics of stochastic programming and …

Dedicated to the memory of my two most admired purists whose work stood the test of time
against the critics: Theodore Samuel Williams, baseball player and fisherman and Merton H …

Stochastic optimization models have been extensively applied to financial portfolios and
have proven their effectiveness in asset and asset-liability management. Occasionally …

Today? s traders want to know when volatility is a sign that the sky is falling (and they should
stay out of the market), and when it is a sign of a possible trading opportunity. Inside …

In models of decision making under uncertainty, one typically has to approximate the
uncertainties by a limited number of discrete outcomes. Høyland and Wallace (2001) …

This paper presents procedures for constructing numerically solvable discretizations of
multistage stochastic programs that epi-converge to the original problem as the …

Strategic asset allocation is a crucial activity for any institutional or individual investor. Given
a set of asset classes, the problem concerns the definition and management over time of the …

Traditional methods for hedging interest rate risk do not take transaction costs into account
as they aim to eliminate all risk. We propose a two-stage stochastic programming model for …

If the price of an asset follows a jump diffusion process, the market is in general incomplete.
In this case, hedging a contingent claim written on the asset is not a trivial matter, and other …

Derivative contracts require the replication of the product by means of a dynamic portfolio
composed of simpler, more liquid securities. For a broad class of options encountered in …