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Stochastic Programming References

Birge JR amd Judice P, Long-Term Bank Balance Sheet Management: Estimation and 
Simulation of Risk-Factors, 2012, here. QRM must be coming out of Northwestern 
or Chicago somehow.

We propose a dynamic framework which encompasses the main risks in balance sheets
 of banks in an integrated fashion. Our contributions are fourfold: 1) solving a 
simple one-period model that describes the optimal bank policy under credit risk;
 2) estimating the long-term stochastic processes underlying the risk factors in
 the balance sheet, taking into account the credit and interest rate cycles; 
3) simulating several scenarios for interest rates and charge-offs; and 
4) describing the equations that govern the evolution of the balance sheet in 
the long run. The models that we use address momentum and the interaction 
between different rates. Our results enable simulation of bank balance sheets 
over time given a bank's lending strategy and provides a basis for an 
optimization model to determine bank asset-liability management strategy 
endogenously.

Birge, Dempster, Shapiro, Prekopa, Nemirovski, Rockafellar, Ruszczynski
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