STOCHASTIC DEDICATION - DESIGNING FIXED INCOME PORTFOLIOS USING MASSIVELY-PARALLEL BENDERS DECOMPOSITION

• 成果类型: Article
• 署名作者: HILLER, RS; ECKSTEIN, J
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.39.11.1422
• 发表日期: 1993
• 页码: 1422-1438
• 关键词: finance; portfolios; Stochastic Programming; Benders decomposition; COMPUTERS PARALLEL; Decision Analysis; RISK

摘要

Drawing on recent developments in discrete time fixed income options theory, we propose a stochastic programming procedure, which we call stochastic dedication, for managing asset/liability portfolios with interest rate contingent claims. The model uses scenario generation to combine deterministic dedication techniques with stochastic duration matching methods, and provides the portfolio manager with a risk/return Pareto optimal frontier from which a portfolio may be selected based on individual risk attitudes. We employ a fixed income risk metric that can be interpreted as the fair market value of a collection of interest rate options that eliminates bankruptcy risk from the asset/liability portfolio. We incorporate this metric into a risk/return stochastic optimization model, using a binomial lattice sampling procedure to construct interest rate paths and cash flow streams from an arbitrage-free term structure model. The resulting parametric linear program has a particularly simple subproblem structure, and we have been able to solve it using resource-directed decomposition on a massively parallel computer system, the Connection Machine CM-2. We take a novel approach that uses a standard serial simplex method to solve the master problem, but generates scenarios and Benders cuts in a massively parallel manner. We discuss the performance of this implementation and present the results for a simple pension fund immunization problem.