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Maintaining liquid asset portfolios involves a high carry cost and is mandatory by law for most financial institutions. Taking this into account, a financial institution's aim is to manage a liquid asset portfolio in an optimal way, such that it keeps the minimum required liquid assets to comply with regulations. This paper proposes a multistage dynamic stochastic programming model for liquid asset portfolio management that allows for portfolio rebalancing decisions over a multiperiod horizon, as well as for flexible risk management decisions, such as reinvesting coupons, at intermediate time steps.
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