A multi-objective multi-period stochastic programming model for public debt management

Balibek, Emre; Köksalan, Murat

doi:10.1016/j.ejor.2009.12.001

Cited by 34 publications

(17 citation statements)

References 17 publications

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“…Other notable work in this area includes Bernaschi et al (2007), which provides results on the multivariate simulation of interest rates using observable (ECB) rates as well as analysis of principal components. The research reported in Consiglio and Staino (2010) and Balibek and Köksalan (2010) is the closest in spirit to the work reported here, in the sense that, both these papers also develop multi-stage stochastic programming models for sovereign debt issuance.…”

Section: The Debt Management Problemmentioning

confidence: 90%

“…The authors are not aware of the use of filtering based framework to generate scenarios in a supply-side optimization. (2) We use a recombining lattice-based stochastic programming model as opposed to a non-recombining scenario tree used in Consiglio and Staino (2010) and Balibek and Köksalan (2010) while discussing the sovereign debt issuance. This makes the problem computationally significantly simpler, as the number of scenarios is reduced significantly, while retaining consistency with the underlying theoretical interest rate model.…”

Section: The Debt Management Problemmentioning

confidence: 99%

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A mixed integer linear programming model for optimal sovereign debt issuance

Date

Canepa

Abdel-Jawad

2011

European Journal of Operational Research

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Governments borrow funds to finance the excess of cash payments or interest payments over receipts, usually by issuing fixed income debt and index-linked debt. The goal of this work is to propose a stochastic optimization-based approach to determine the composition of the portfolio issued over a series of government auctions for the fixed income debt, to minimize the cost of servicing debt while controlling risk and maintaining market liquidity. We show that this debt issuance problem can be modeled as a mixed integer linear programming problem with a receding horizon. The stochastic model for the interest rates is calibrated using a Kalman filter and the future interest rates are represented using a recombining trinomial lattice for the purpose of scenario-based optimization. The use of a latent factor interest rate model and a recombining lattice provides us with a realistic, yet very tractable scenario generator and allows us to do a multi-stage stochastic optimization involving integer variables on an ordinary desktop in a matter of seconds. This, in turn, facilitates frequent re-calibration of the interest rate model and re-optimization of the issuance throughout the budgetary year allows us to respond to the changes in the interest rate environment. We successfully demonstrate the utility of our approach by out-of-sample back-testing on the UK debt issuance data.

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Section: The Debt Management Problemmentioning

confidence: 90%

Section: The Debt Management Problemmentioning

confidence: 99%

A mixed integer linear programming model for optimal sovereign debt issuance

Date

Canepa

Abdel-Jawad

2011

European Journal of Operational Research

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“…One can find in regular use as risk metrics the stochastic variance (i.e. uncertainty, whether conditional or unconditional) of interest-cost, the variability of interest-cost one can expect to observe unfolding over time, and measures of interest cost such as Cost-at-Risk (CaR) and variants that are based on the tails of the distribution of outcomes (examples for some/all of these can be found in, for example, [1], [2], [6], [7], [8], [11], [12], [13], [18]). There is also a growing view that the focus of cost quantification ought to be the primary balance (or total deficit) rather than interest cost in isolation (cf.…”

Section: Risk Proxymentioning

confidence: 99%

Visualizing Treasury Issuance Strategy

Cameron

2018

SSRN Journal

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“…These contributions typically highlight the positive role operational researchers can play in using quantitative techniques to address crucial development issues such as: public finance and debt management (Balibek and Köksalan, 2010), health care system design (Rahman and Smith, 2000), water resource development plans (Abu-Taleb and Mareschal, 1995), infrastructure planning (Brimberg et al, 2003), natural resource policy (Kalu, 1998), or rural electrification problems (Henao et al, 2012;Ferrer-Martí et al, 2013). So far, the export planning issues faced in developing economies have received very little attention.…”

Section: Introductionmentioning

confidence: 99%

Export diversification through resource-based industrialization: The case of natural gas

Massol

Banal‐Estañol

2014

European Journal of Operational Research

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This is the accepted version of the paper.This version of the publication may differ from the final published version. February 14, 2014 Permanent AbstractFor small resource-rich developing economies, specialization in raw exports is usually considered to be detrimental to growth and Resource-Based Industrialization (RBI) is often advocated to promote export diversification. This paper develops a new methodology to assess the performance of these RBI policies. We first formulate an adapted mean-variance portfolio model that explicitly takes into consideration: (i) a technology-based representation of the set of feasible export combinations, and (ii) the cost structure of the resource processing industries. Second, we provide a computationally tractable reformulation of the resulting mixed-integer nonlinear optimization problem.Finally, we present an application to the case of natural gas, comparing current and efficient export-oriented industrialization strategies of nine gas-rich developing countries.

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A multi-objective multi-period stochastic programming model for public debt management

Cited by 34 publications

References 17 publications

A mixed integer linear programming model for optimal sovereign debt issuance

A mixed integer linear programming model for optimal sovereign debt issuance

Visualizing Treasury Issuance Strategy

Export diversification through resource-based industrialization: The case of natural gas

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