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Karl Frauendorfer
Title
Prof. Dr.
Last Name
Frauendorfer
First name
Karl
Email
karl.frauendorfer@unisg.ch
Phone
+41 71 224 2105
Now showing
1 - 3 of 3
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PublicationA Stochastic Optimization Model for the Investment of Savings Account DepositsA bank's financial management faces various sources of uncertainty when funds from savings account deposits are invested in the marketplace. Future interest rates are unknown and customers are allowed to withdraw their deposits at any point in time. The objective is to find a portfolio of fixed income instruments that maximizes the bank's interest surplus from the investment of funds and to manage the prepayment risk inherent to non-maturing accounts. A multistage stochastic programming model is presented that takes into account the uncertain evolution of interest rates and volume. A case study based on interest rate data of a 7 years period indicates that the surplus can be increased by 25 basis points compared to the static approach formerly used, while volatility is reduced significantly.Type: conference paper
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PublicationStochastic Optimization in Asset & Liability Management: A Model for Non-Maturing Accounts(Kluwer Academic Publishers, 2001)
;Ziemba, W.T.Mulvey, J.M. -
PublicationBarycentric Approximation of Stochastic Interest Rate Processes(Cambridge University Press, 1998)
;Mulvey, J.M.Ziemba, W.T.The incorporation of single-factor interest rate models within the stochastic programming methodology is investigated and applied to multiperiod investment. Barycentric approximation is used for discretizing the stochastic factors and for generating scenario trees which take the various term structure movements into account. It is shown that employing the Vasicek model for the instantaneous rate process preserves convexity of the stochastic multistage program and, hence, guarantees information on the accuracy of the approximate investment strategies. To the contrary, the convexity of the program cannot be assessed if the square root process due to Cox-Ingersoll-Ross is used for the instantaneous rate. In this case, the approximate investment policies and their associated interest surplus may be accepted as estimates. Numerical results for 8-period and 6-period investment problems are discussed.Type: book section