Strategic financial risk management and operations research

John M. Mulvey, Daniel P. Rosenbaum, Bala Shetty

Research output: Contribution to journalReview article

60 Scopus citations

Abstract

Risk management has become a vital topic for financial institutions in the 1990s. Strategically, asset/liability management systems are important tools for controlling a firm's financial risks. They manage these risks by dynamically balancing the firm's asset and liabilities to achieve the firm's objectives. We discuss such leading international firms as Towers Perrin, Frank Russell, and Falcon Asset Management, which apply asset/liability management for efficiently managing risk over extended time periods. Three components of asset/liability management are described: 1) a multi-stage stochastic program for coordinating the asset/liability decisions; 2) a scenario generation procedure for modeling the stochastic parameters; and 3) solution algorithms for solving the resulting large-scale optimization problem.

Original languageEnglish (US)
Pages (from-to)1-16
Number of pages16
JournalEuropean Journal of Operational Research
Volume97
Issue number1
DOIs
StatePublished - Feb 16 1997

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

Keywords

  • Financial engineering
  • Nonlinear programming
  • Stochastic optimization

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