Portfolio optimisation with application to two-stage multiperiod Stochastic programs

Abstract

The problem of optimising a portfolio having a finite number of assets is a classical problem in finance. It is an important issue for every investor to earn an acceptable amount of return, while at the same time maintaining a certain level of risk. This work is oriented to a central bank in particular to the Central Bank of Malta. Central banks hold foreign exchange reserves in order to maintain the capacity to intervene in exceptional circumstances in currency markets and to provide liquidity to support currency boards and fixed exchange rate regimes. Moreover reserves serve as the nation's store of wealth. Therefore it is of extreme importance for central banks to choose a suitable optimisation model of the foreign reserves.