Personalized goal-based investing via multi-stage stochastic goal programming

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In this paper, we propose a goal-based investment model that is suitable for personalized wealth management. The model only requires a few intuitive inputs such as size of wealth, investment amount, and consumption goals from individual investors. In particular, a priority level can be assigned to each consumption goal and the model provides a holistic solution based on a sequential approach starting with the highest priority. This allows strict prioritization by maximizing the probability of achieving higher priority goals that are not affected by goals with lower priorities. Furthermore, the proposed model is formulated as a linear program that efficiently finds the optimal financial plan. With its simplicity, flexibility, and computational efficiency, the proposed goal-based investment model provides a new framework for automated investment management services.
Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
Issue Date
2020-03
Language
English
Article Type
Article
Citation

QUANTITATIVE FINANCE, v.20, no.3, pp.515 - 526

ISSN
1469-7688
DOI
10.1080/14697688.2019.1662079
URI
http://hdl.handle.net/10203/274190
Appears in Collection
IE-Journal Papers(저널논문)
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