Solving long-term financial planning problems via global optimization

C. D. Maranas, I. P. Androulakis, C. A. Floudas, A. J. Berger, J. M. Mulvey

Research output: Contribution to journalArticlepeer-review

91 Scopus citations


A significant multi-stage financial planning problem is posed as a stochastic program with decision rules. The decision rule - called dynamically balanced - requires the purchase and sale of assets at each time stage so as to keep constant asset proportions in the portfolio composition. It leads to a nonconvex objective function. We show that the rule performs well as compared with other dynamic investment strategies. We specialize a global optimization algorithm for this problem class - guaranteeing finite ε-optimal convergence. Computational results demonstrate the procedure's efficiency on a real-world financial planning problem. The tests confirm that local optimizers are prone to erroneously underestimate the efficient frontier. The concepts can be readily extended for other classes of long-term investment strategies.

Original languageEnglish (US)
Pages (from-to)1405-1425
Number of pages21
JournalJournal of Economic Dynamics and Control
Issue number8-9
StatePublished - Jun 29 1997

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


  • Financial planning problems
  • Fixed-mix problem
  • Global optimization algorithm


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