Title: Strategic Financial Management in a Multinational Financial Conglomerate: A Multiple Goal Stochastic Programming Approach
Authors: Antti Korhonen
Date: January 2001
Status: European Journal of Operational Research, Volume 128, No. 2, January 2001.
Keywords: Strategic planning, financial institutions, asset and liability management, risk analysis, stochastic optimization
Abstract: The paper discusses a multi-stage stochastic programming approach to the strategic financial management of a multi-company financial conglomerate. The planning system creates a comprehensive strategy which simultaneously covers a number of future scenarios within a multiperiod planning horizon. Multiple conflicting goals may be specified for the group level, company level or individual business area level, and the decision maker's preferences are allowed to change over time to reflect changing operating conditions and trade-off relationships between the goals. Special features include, among other things, full market valuation throughout the model, integrated treatment of different types of risks, explicit modelling of various types of intra-group transactions and relationships, extensive structures to deal with distressed assets and the covering of losses within the group, as well as consideration of potential portfolio effects of a diversified group structure on the cost of funding.