Scenario tree generation and multi-asset financial optimization problems

作者：Geyer Alois; Hanke Michael^*; Weissensteiner Alex

来源：Operations Research Letters, 2013, 41(5): 494-498.

DOI：10.1016/j.orl.2013.06.003

• Scenario trees
• No-arbitrage
• Financial optimization
• Moment matching
• Scenario reduction

We compare two popular scenario tree generation methods in the context of financial optimization: moment matching and scenario reduction. Using a simple problem with a known analytic solution, moment matching - when ensuring absence of arbitrage - replicates this solution precisely. On the other hand, even if the scenario trees generated by scenario reduction are arbitrage-free, the solutions are biased and highly variable. These results hold for correlated and uncorrelated asset returns, as well as for normal and non-normal returns.

• 出版日期2013-9