Financial planning for young households

Anne Marie Boiden Pedersen; Alex Weissensteiner; Rolf Poulsen

doi:10.1007/s10479-012-1205-3

Financial planning for young households

Anne Marie Boiden Pedersen, Alex Weissensteiner, Rolf Poulsen

Department of Mathematical Sciences

9 Citations (Scopus)

Abstract

We analyze the financial planning problems of young households whose main decisions are how to finance the purchase of a house (liabilities) and how to allocate investments in pension savings schemes (assets). The problems are solved using a multi-stage stochastic programming model where the uncertainty is described by a scenario tree generated from a vector auto-regressive process for equity returns and interest rate evolution. We find strong evidence of the importance of taking into account the multi-stage nature of the problem, as well as the need to consider the asset and liability sides jointly.

Original language	English
Journal	Annals of Operations Research
Volume	205
Issue number	1
Pages (from-to)	55-76
Number of pages	22
ISSN	0254-5330
DOIs	https://doi.org/10.1007/s10479-012-1205-3
Publication status	Published - May 2013

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10.1007/s10479-012-1205-3

Cite this

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title = "Financial planning for young households",

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AB - We analyze the financial planning problems of young households whose main decisions are how to finance the purchase of a house (liabilities) and how to allocate investments in pension savings schemes (assets). The problems are solved using a multi-stage stochastic programming model where the uncertainty is described by a scenario tree generated from a vector auto-regressive process for equity returns and interest rate evolution. We find strong evidence of the importance of taking into account the multi-stage nature of the problem, as well as the need to consider the asset and liability sides jointly.

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