Authors: Giorgio Consigli; Massimo Di Tria
Addresses: DMEQM, University of Bergamo (ITA), Italy ' Cattolica Assicurazioni, Italy
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.
Keywords: dynamic stochastic programming; households' finance; asset-liability management; goal-based investing; life-cycle.
International Journal of Financial Engineering and Risk Management, 2018 Vol.2 No.4, pp.308 - 334
Available online: 03 Aug 2018 *Full-text access for editors Access for subscribers Purchase this article Comment on this article