As asset allocation model with penalty costs and its computational algorithm

This paper develops an asset allocation model with various risk measures, which is quite different from the mean variance portfolio models. From institutional investors’ perspective the purpose of investing is to achieve a target level of rate of return to meet the cash flows of the business. The unfavorable situation to this purpose is penalized as a risk. The model developed here is in closer agreement with actual practice in Japanese financial institutions. Furthermore, the scenarios and hedging algorithm are developed, which is applicable to solve large scale stochastic programming problems with recourse. [In Japanese.]