infonet-economy

Multistage stochastic programming is applied to optimal funding and to multistage mean-variance analysis. Optimal funding is part of the fixed income management where the various types of interest rate risk have to be controlled, primarily. Mean-variance is used within asset allocation for controlling the equity risk, fond manager are exposed to, mainly. Both problems suffer from the curse of dimensionality due to the dynamic decision making. It is discussed, how the funding model and the multistage mean-variance model benefit from the convexity of their value functions with respect to numerical solvability.