Asset-liability management and goal-based investing for retail business Online publication date: Mon, 13-Aug-2018
by Giorgio Consigli; Massimo Di Tria
International Journal of Financial Engineering and Risk Management (IJFERM), Vol. 2, No. 4, 2018
Abstract: The industry of online personal financial services is expected over the next years to absorb an increasing share of households and individuals' savings and investment decisions with a parallel expansion of tailored decision tools and underlying methodological developments. In this article we present a dynamic stochastic optimisation model formulated to tackle a long-term optimal wealth management problem-based explicitly on the introduction of consumption and investment goals with a terminal inflation-adjusted retirement target. By embedding a goal-based investing philosophy in a dynamic framework we provide a reference modelling approach for increasingly popular households asset-liability management services. In a discrete setting we show that a dynamic stochastic programming formulation will lead to a highly realistic representation and solution of an otherwise hardly manageable optimisation problem and it is consistent with computer-aided decision support tools' operational requirements.
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