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  4. Term Structure Models in Multistage Stochastic Programming: Estimation and Approximation
 
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Term Structure Models in Multistage Stochastic Programming: Estimation and Approximation

Journal
Annals of Operations Research
ISSN
0254-5330
ISSN-Digital
1572-9338
Type
journal article
Date Issued
2000-12-01
Author(s)
Frauendorfer, Karl  
Schürle, Michael  
DOI
10.1023/A:1019223318808
Abstract
This paper investigates some common interest rate models for scenario generation in financial applications of stochastic optimization. We discuss conditions for the underlying distributions of state variables which preserve convexity of value functions in a multistage stochastic program. One- and multi-factor term structure models are estimated based on historical data for the Swiss Franc. An analysis of the dynamic behavior of interest rates generated with these models reveals several deficiencies which have an impact on the performance of investment policies derived from the stochastic program. While barycentric approximation is used here for the generation of scenario trees, these insights may be generalized to other discretization techniques as well.
Language
English
Keywords
Multistage Stochastic Programming
Asset & Liability Management
Barycentric Approximation
Non-Maturing Assets & Liabilities
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Kluwer
Publisher place
Dordrecht
Volume
100
Number
1-4
Start page
189
End page
209
Pages
21
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/73775
Subject(s)

business studies

Division(s)

ior/cf - Institute fo...

Eprints ID
7086
File(s)
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Thumbnail Image

open.access

Name

vancouv6.pdf

Size

414.8 KB

Format

Adobe PDF

Checksum (MD5)

b547c1991fde1dc06c3748fe775a57b6

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