Dynamic stochastic optimization

2014 ◽  
Author(s):  
Craig Wilson ◽  
Venugopal Veeravalli ◽  
Angelia Nedic
Keyword(s):  
Stochastic Optimization ◽  
Dynamic Stochastic

scholarly journals STOCHASTIC OPTIMIZATION OF HEURISTIC METHOD RULE TO DETERMINE ASSET ALLOCATION TO RETIREMENT PORTFOLIO / STOCHASTINIS EURISTINIO METODO TAISYKLĖS PENSIJOS PORTFELIO SUDĖČIAI NUSTATYTI OPTIMIZAVIMAS

2011 ◽  
Vol 12 (1) ◽  
pp. 92-98
Author(s):  
Aušra Klimavičienė
Keyword(s):  
Stochastic Optimization ◽  
Stochastic Simulation ◽  
Asset Allocation ◽  
Heuristic Method ◽  
Simulation Models ◽  
Optimization Techniques ◽  
Human Lifespan ◽  
Stochastic Returns ◽  
Dynamic Stochastic ◽  
Population Mortality

The article examines the problem of determining asset allocation to sustainable retirement portfolio. The article attempts to apply heuristic method – 100 minus age in stocks rule – to determine asset allocation to sustainable retirement portfolio. Using dynamic stochastic simulation and stochastic optimization techniques the optimization of heuristic method rule is presented and the optimal alternative to „100“ is found. Seeking to reflect the stochastic nature of stock and bond returns and the human lifespan, the dynamic stochastic simulation models incorporate both the stochastic returns and the probability of living another year based on Lithuania‘s population mortality tables. The article presents the new method – adjusted heuristic method – to be used to determine asset allocation to retirement portfolio and highlights its advantages.

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