A Monte Carlo-Based Framework for Two-Stage Stochastic Programming: Application to Bond Portfolio Optimization

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Vydáno v:Entropy vol. 27, no. 11 (2025), p. 1118-1145
Hlavní autor: Hissah, Albaqami
Další autoři: Mrad Mehdi, Gharbi Anis, Subasi Munevver Mine
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MDPI AG
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100 1 |a Hissah, Albaqami  |u Department of Mathematics and Systems Engineering, Florida Institute of Technology, Melbourne, FL 32901, USA; h.hassh@tu.edu.sa 
245 1 |a A Monte Carlo-Based Framework for Two-Stage Stochastic Programming: Application to Bond Portfolio Optimization 
260 |b MDPI AG  |c 2025 
513 |a Journal Article 
520 3 |a This paper presents a Monte Carlo simulation-based approach for solving stochastic two-stage bond portfolio optimization problems. The main objective is to optimize the cost of the bond portfolio while making decisions on bond purchases, holdings, and sales under random market conditions such as interest rate fluctuations and liabilities. The proposed algorithm identifies the number of randomly generated scenarios required to convert the stochastic problem into a deterministic one, subsequently solving it as a Mixed-Integer Linear Program. The practical relevance of this research is shown through an application of the proposed method to a real-world bond market. The results indicate that the proposed approach successfully minimizes costs and meets liabilities, providing a robust solution for bond portfolio optimization. 
653 |a Sample size 
653 |a Monte Carlo simulation 
653 |a Integer programming 
653 |a Investments 
653 |a Random variables 
653 |a Bond portfolios 
653 |a Sample variance 
653 |a Optimization techniques 
653 |a Decision making 
653 |a Optimization 
653 |a Approximation 
653 |a Linear programming 
653 |a Mixed integer 
653 |a Interest rates 
653 |a Expected values 
653 |a Stochastic programming 
700 1 |a Mrad Mehdi  |u Essect School of Business, University of Tunis, Tunis 1089, Tunisia; mehdi.mrad@essect.u-tunis.tn 
700 1 |a Gharbi Anis  |u Department of Industrial Engineering, College of Engineering, King Saud University, Riyadh 11421, Saudi Arabia; a.gharbi@ksu.edu.sa 
700 1 |a Subasi Munevver Mine  |u Department of Mathematics and Systems Engineering, Florida Institute of Technology, Melbourne, FL 32901, USA; h.hassh@tu.edu.sa 
773 0 |t Entropy  |g vol. 27, no. 11 (2025), p. 1118-1145 
786 0 |d ProQuest  |t Engineering Database 
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